<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
REEBOK INTERNATIONAL LTD.
(NAME OF ISSUER)
REEBOK INTERNATIONAL LTD.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK
(TITLE OF CLASS OF SECURITIES)
758110
(CUSIP NUMBER OF CLASS OF SECURITIES)
JOHN B. DOUGLAS III
EXECUTIVE VICE PRESIDENT, LAW, HUMAN RESOURCES AND ADMINISTRATION
REEBOK INTERNATIONAL LTD.
100 TECHNOLOGY CENTER DRIVE
STOUGHTON, MASSACHUSETTS 02072
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING
STATEMENT)
------------------------
COPIES TO:
DAVID B. WALEK, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
JULY 30, 1996
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)
------------------------
<TABLE>
CALCULATION OF FILING FEE
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<CAPTION>
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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<S> <C>
$864,000,000.00 $172,800.00
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</TABLE>
* Calculated solely for the purpose of determining the filing fee, based upon
the purchase of 24,000,000 shares at $36.00 per share.
/ / CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
<TABLE>
<S> <C> <C> <C>
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
</TABLE>
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<PAGE> 2
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4 relates is
Reebok International Ltd., a Massachusetts corporation (the "Company"), and the
address of its principal executive office is 100 Technology Center Drive,
Stoughton, Massachusetts 02072.
(b) This Schedule 13E-4 relates to the offer by the Company to purchase
24,000,000 shares (or such lesser number of shares as are properly tendered) of
its Common Stock, par value $.01 per share, (such shares, together with the
associated Common Stock Purchase Rights (the "Rights") issued pursuant to the
Common Stock Rights Agreement dated as of June 14, 1990 between the Company and
The First National Bank of Boston, as Rights Agent, are hereinafter referred to
as the "Shares"), 72,536,700 of which Shares were outstanding as of July 26,
1996, at a price not in excess of $36.00 nor less than $30.00 net per Share in
cash upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated July 30, 1996 (the "Offer to Purchase"), and in the related
Letter of Transmittal, which together constitute the "Offer", copies of which
are attached as Exhibit (a)(1) and (a)(2), respectively, and incorporated herein
by reference. Executive officers and directors of the Company may participate in
the Offer on the same basis as the Company's other shareholders, although the
Company has been advised that no director or executive officer of the Company
intends to tender any Shares pursuant to the Offer. The information set forth in
"Introduction" and "The Offer -- Section 1, Number of Shares; Proration" of the
Offer to Purchase is incorporated herein by reference.
(c) The information set forth in "Introduction" and the "The
Offer -- Section 8, Price Range of Shares; Dividends" of the Offer to Purchase
is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "The Offer -- Section 9, Source and
Amount of Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) The information set forth in "Introduction" and "The
Offer -- Section 9, Source and Amount of Funds," "The Offer -- Section 2,
Purpose of the Offer; Certain Effects of the Offer," "The Offer -- Section 11,
Interest of Directors and Officers; Transactions and Arrangements Concerning
Shares" and "The Offer -- Section 12, Effects of the Offer on the Market for
Shares; Registration under the Exchange Act" of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "The Offer -- Section 11, Interest of
Directors and Officers; Transactions and Arrangements Concerning Shares" and
Schedule A, "Certain Transactions Involving Shares" of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in "Introduction" and "The Offer -- Section 9,
Source and Amount of Funds," "The Offer -- Section 2, Purpose of the Offer;
Certain Effects of the Offer," and "The Offer -- Section 11, Interest of
Directors and Officers; Transactions and Arrangements Concerning Shares" of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
The information set forth in "Introduction" and "The Offer -- Section 16,
Fees and Expenses" of the Offer to Purchase is incorporated herein by reference.
1
<PAGE> 3
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "The Offer -- Section 10, Certain
Information Concerning the Company" of the Offer to Purchase is incorporated
herein by reference, the information set forth on pages 36 through 47 of the
Company's Annual Report to Shareholders incorporated by reference into the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, filed
as Exhibit (g)(1) hereto, is incorporated herein by reference, and the
information set forth on pages 2 through 8 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, filed as Exhibit (g)(2) is
incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth in "The Offer -- Section 13, Certain Legal
Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein
by reference.
(c) The information set forth in "The Offer -- Section 12, Effect of the
Offer on the Market for Shares; Registration under the Exchange Act" of the
Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the Offer to Purchase and Letter of
Transmittal is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase, dated July 30, 1996.
(2) Form of Letter of Transmittal (including Certification of Taxpayer
Identification Number on Form W-9).
(3) Form of Notice of Guaranteed Delivery.
(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(6) Text of Press Release issued by the Company, dated July 29, 1996.
(7) Form of Summary Advertisement, dated July 30, 1996.
(8) Form of Letter to Shareholders of the Company, dated July 30,
1996, from Paul Fireman, Chairman of the Board and Chief
Executive Officer of the Company.
(b) Commitment Letter dated as of July 28, 1996 between Credit Suisse
and the Company.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Pages 36 through 47 of the Company's Annual Report to
Shareholders incorporated by reference into the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
(2) Pages 2 through 8 of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.
2
<PAGE> 4
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Schedule 13E-4 is true, complete and
correct.
July 30, 1996 REEBOK INTERNATIONAL LTD.
By: /s/ KENNETH WATCHMAKER
----------------------
Name: Kenneth Watchmaker
Title: Executive Vice President,
Chief Financial Officer
3
<PAGE> 5
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
(a)(1) Form of Offer to Purchase, dated July 30, 1996.
(2) Form of Letter of Transmittal (including Certification of Taxpayer Identification
Number on Form W-9).
(3) Form of Notice of Guaranteed Delivery.
(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(6) Text of Press Release issued by the Company, dated July 29, 1996.
(7) Form of Summary Advertisement, dated July 30, 1996.
(8) Form of Letter to Shareholders of the Company, dated July 30, 1996, from Paul
Fireman, Chairman of the Board and Chief Executive Officer of the Company.
(b) Commitment Letter dated as of July 28, 1996 between Credit Suisse and the Company.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Pages 36 through 47 of the Company's Annual Report to Shareholders incorporated by
reference into the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
(2) Pages 2 through 8 of the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996.
</TABLE>
4
<PAGE> 1
[REEBOK LOGO]
Offer To Purchase For Cash Up To
24,000,000 Shares Of Its Common Stock
At A Purchase Price Not In Excess Of $36.00
Nor Less Than $30.00 Per Share
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON TUESDAY, AUGUST 27, 1996,
UNLESS THE OFFER IS EXTENDED.
------------------
Reebok International Ltd., a Massachusetts corporation (the "Company"), hereby
invites its shareholders to tender shares of its Common Stock, $.01 par value
per share (the "Shares"), to the Company at a price not in excess of $36.00
nor less than $30.00 per Share in cash, as specified by shareholders
tendering their Shares, upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal which together
constitute the "Offer". The Company will determine the single per Share
price, not in excess of $36.00 nor less than $30.00 per Share, net to
the seller in cash (the "Purchase Price"), that it will pay for
Shares properly tendered pursuant to the Offer, taking into
account the number of Shares so tendered and the prices specified
by tendering shareholders. The Company will select the lowest
Purchase Price that will allow it to buy 24,000,000 Shares (or
such lesser number of shares as are properly tendered at prices
not in excess of $36.00 nor less than $30.00 per Share). All
Shares properly tendered at prices at or below the Purchase
Price and not withdrawn will be purchased at the Purchase
Price, subject to the terms and the conditions of the Offer,
including the proration and conditional tender provisions.
All Shares acquired in the Offer will be acquired at the
Purchase Price. The Company reserves the right, in its
sole discretion, to purchase more than 24,000,000 Shares
pursuant to the Offer. See Section 15.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7.
The Shares are listed and traded on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "RBK". On July 29, 1996, the last full trading
day on the NYSE prior to the commencement of the Offer, the
closing per Share sales price as reported on the NYSE
Composite Tape was $34.75. SHAREHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE
SECTION 8.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NEITHER
THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO SHAREHOLDERS
AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES. EACH
SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES AND AT WHAT PRICE OR PRICES SHARES SHOULD BE
TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS
OR EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE
OFFER.
------------------
IMPORTANT
Any shareholder wishing to tender all or any part of his or her Shares
should either (a) complete and sign a Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal and
either mail or deliver it with any required signature guarantee and any other
required documents to The First National Bank of Boston (the "Depositary"), and
either mail or deliver the stock certificates for such Shares to the Depositary
(with all such other documents) or tender such Shares pursuant to the procedure
for book-entry tender set forth in Section 3, or (b) request a broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such shareholder. Holders of Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee should contact such person if
they desire to tender their Shares. Any shareholder who desires to tender Shares
and whose certificates for such Shares cannot be delivered to the Depositary or
who cannot comply with the procedure for book-entry transfer or whose other
required documents cannot be delivered to the Depositary, in any case, by the
expiration of the Offer must tender such Shares pursuant to the guaranteed
delivery procedure set forth in Section 3.
To properly tender Shares, shareholders must complete the section of the
Letter of Transmittal relating to the price at which they are tendering Shares.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or to the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal or the Notice of Guaranteed Delivery may be obtained from the
Information Agent.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
------------------
The Dealer Manager for the Offer is:
CS First Boston
July 30, 1996
<PAGE> 2
- -------------------------------------------------------------------------------
SUMMARY
This general summary is solely for the convenience of the Company's
shareholders and is qualified in its entirety by reference to the full text and
more specific details in this Offer to Purchase.
Purchase Price............. The Company will select a single Purchase Price
which will be not more than $36.00 nor less than
$30.00 per Share. All Shares purchased by the
Company will be purchased at the Purchase Price
even if tendered at or below the Purchase Price.
Each shareholder desiring to tender Shares must
specify in the Letter of Transmittal the minimum
price (not more than $36.00 nor less than $30.00
per Share) at which such shareholder is willing to
have his or her Shares purchased by the Company.
Number of Shares to be
Purchased................ 24,000,000 Shares (or such lesser number of Shares
as are properly tendered).
How to Tender Shares....... See Section 3. Call the Information Agent, the
Dealer Manager or consult your broker for
assistance.
Brokerage Commissions...... None.
Stock Transfer Tax......... None, if payment is made to the registered holder.
Expiration and Proration
Dates...................... Tuesday, August 27, 1996, at 5:00 P.M., New York
City time, unless extended by the Company.
Payment Date............... As soon as practicable after the termination of the
Offer.
Position of the Company and
its Directors.............. Neither the Company nor its Board of Directors
makes any recommendation to any shareholder as to
whether to tender or refrain from tendering Shares.
The Company has been advised that none of its
directors or executive officers intends to tender
any Shares pursuant to the Offer.
Intention of Largest
Shareholders............. Paul Fireman, Chairman and Chief Executive Officer
of the Company, and his wife (but excluding
associated trusts which own an aggregate of
1,525,000 Shares), who together beneficially own an
aggregate of 10,215,158 Shares, representing
approximately 14.1% of the outstanding Shares as of
July 26, 1996, have advised the Company that they
do not intend to tender any Shares pursuant to the
Offer. If the Company purchases 24,000,000 Shares
pursuant to the Offer, the beneficial ownership of
the Firemans would increase to approximately 21.1%
of the Shares outstanding immediately after the
Offer.
Withdrawal Rights.......... Tendered Shares may be withdrawn at any time until
5:00 P.M., New York City time, on Tuesday, August
27, 1996, unless the Offer is extended by the
Company, and, unless previously purchased, after
12:00 Midnight, New York City time, on Tuesday,
September 24, 1996. See Section 3.
Odd Lots................... There will be no proration of Shares tendered by
any shareholder owning beneficially less than 100
Shares as of July 26, 1996, who tenders all such
Shares at or below the Purchase Price prior to the
Proration Date and who checks the "Odd Lots" box in
the Letter of Transmittal. See Section 1.
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2
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<CAPTION>
SECTION PAGE
- --------- ----
<S> <C> <C>
INTRODUCTION............................................................................. 4
THE OFFER................................................................................ 6
1. Number of Shares; Proration.................................................. 6
2. Purpose of the Offer; Certain Effects of the Offer........................... 8
3. Procedures for Tendering Shares.............................................. 10
4. Withdrawal Rights............................................................ 13
5. Purchase of Shares and Payment of Purchase Price............................. 14
6. Conditional Tender of Shares................................................. 14
7. Certain Conditions of the Offer.............................................. 15
8. Price Range of Shares; Dividends............................................. 16
9. Source and Amount of Funds................................................... 17
10. Certain Information Concerning the Company................................... 18
11. Interest of Directors and Officers; Transactions and Arrangements Concerning
Shares....................................................................... 21
12. Effects of the Offer on the Market for Shares; Registration
under the Exchange Act....................................................... 21
13. Certain Legal Matters; Regulatory Approvals.................................. 22
14. Certain Federal Income Tax Consequences...................................... 22
15. Extension of Offer; Termination; Amendment................................... 24
16. Fees and Expenses............................................................ 25
17. Miscellaneous................................................................ 25
SCHEDULE A Certain Transactions Involving Shares........................................ A-1
</TABLE>
3
<PAGE> 4
To the Holders of Common Stock of Reebok International Ltd.:
INTRODUCTION
Reebok International Ltd., a Massachusetts corporation (the "Company"),
invites its shareholders to tender shares of its Common Stock, par value $.01
per share (such shares, together with the associated Common Stock Purchase
Rights (the "Rights") issued pursuant to the Common Stock Rights Agreement dated
as of June 14, 1990 between the Company and The First National Bank of Boston,
as Rights Agent, are hereinafter referred to as the "Shares"), at a price not in
excess of $36.00 nor less than $30.00 per Share, as specified by shareholders
tendering their Shares, upon the terms and subject to the conditions set forth
herein and in the related Letter of Transmittal, which together constitute the
"Offer". The Company will determine the single per Share price, not in excess of
$36.00 nor less than $30.00 per Share, net to the seller in cash (the "Purchase
Price"), that it will pay for Shares properly tendered pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will allow it to buy 24,000,000 Shares (or such lesser number of Shares as are
properly tendered). All Shares acquired in the Offer will be acquired at the
Purchase Price. All Shares properly tendered at prices at or below the Purchase
Price and not withdrawn will be purchased at the Purchase Price, upon the terms
and subject to the conditions of the Offer, including the proration and
conditional tender provisions. Shares tendered at prices in excess of the
Purchase Price and Shares not purchased because of proration or conditional
tender will be returned. The Company reserves the right, in its sole discretion,
to purchase more than 24,000,000 Shares pursuant to the Offer. See Section 15.
THIS OFFER IS NOT CONDITIONED UPON THE TENDER OF ANY MINIMUM NUMBER OF
SHARES BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES AND AT WHAT PRICE OR PRICES SHARES SHOULD BE TENDERED. THE COMPANY
HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO
TENDER ANY SHARES PURSUANT TO THE OFFER.
Upon the terms and subject to the conditions of the Offer, if at the
expiration of the Offer more than 24,000,000 Shares are properly tendered at or
below the Purchase Price and not withdrawn, the Company will buy Shares first
from all Odd Lot Holders (as defined in Section 1) who properly tender all their
Shares at or below the Purchase Price and then on a pro rata basis from all
other shareholders who properly tender at prices at or below the Purchase Price
(and did not withdraw them prior to the expiration of the Offer). See Section 1.
All Shares not purchased pursuant to the Offer, including Shares tendered at
prices greater than the Purchase Price and not withdrawn and Shares not
purchased because of proration or conditional tenders, will be returned at the
Company's expense to the shareholders who tendered such Shares.
The Purchase Price will be paid net to the tendering shareholder in cash
for all Shares purchased. Tendering shareholders will not be obligated to pay
brokerage commissions, solicitation fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by the
Company. HOWEVER, ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO
COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE FORM W-9 THAT IS INCLUDED WITH
THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH SHAREHOLDER OR OTHER
PAYEE PURSUANT TO THE OFFER. SEE SECTION 3. The Company will pay all fees and
expenses of CS First Boston Corporation ("CS First Boston" or the "Dealer
Manager"), The First National Bank of Boston (the "Depositary") and MacKenzie
Partners, Inc. (the "Information Agent") incurred in connection with the Offer.
See Section 16.
In early 1996, the Company engaged CS First Boston as its financial advisor
to assist the Company in reviewing from a financial standpoint its business,
prospects and strategies with respect to each operating unit of the Company and
its subsidiaries. Although the Company has in recent years experienced a
significant decline in its share of the U.S. footwear market, the Company has
taken steps which it believes may reverse
4
<PAGE> 5
this trend. On this basis, and on the basis of management's review of the
prospects for products expected to be introduced in 1997, the Company believes
it may be in a position to achieve an operational and financial turnaround, and
that this has not yet been recognized by the stock market. There are, however,
many uncertainties associated with accomplishment of such a turnaround. These
include the decline in market share noted above, slower growth in the U.S.
footwear market, the emergence and growth of strong competitors, the substantial
and increasing investment by such competitors in marketing and advertising, and
the possibility of changing consumer preferences. Moreover, while the Company
has received initially promising responses from certain retailers in the United
States with respect to its new and planned products, there is not yet any
evidence or assurance as to consumer response to these products, nor has the
prospect of an operational or financial turnaround been reflected in the
Company's operating results.
The Board of Directors has determined that the Company's financial
condition and outlook and current market conditions, including recent trading
prices of the Shares, make this an attractive time to repurchase a significant
portion of the outstanding Shares, taking into account the significantly
increased interest expense and debt amortization and financial and operating
constraints associated with the borrowing required to fund the Offer. In the
view of the Board of Directors, the Offer represents a significant acceleration
of what would otherwise have been a continuing share repurchase program and an
attractive investment and use of the Company's cash generation abilities that
should benefit the Company and its shareholders over the long term. In
particular, the Board of Directors believes that the purchase of Shares at this
time is consistent with the Company's long term corporate goal of seeking to
increase shareholder value.
The magnitude of the purchase of Shares in the Offer is substantial. The
Board of Directors took into account that the purchase of 24,000,000 Shares
would represent the retirement of approximately 33.1% of its outstanding Shares
at an aggregate cost of approximately $872 million. If the Offer were fully
subscribed and the purchase of Shares were made at the maximum per Share price,
the Company's stockholders' equity would be reduced from $890.1 million at June
30, 1996 to $18.5 million. This substantial expenditure by the Company will be
financed through a borrowing under a new term loan credit facility. See Section
9.
In deciding to approve the Offer, the Board of Directors also took into
account the expected financial impact of the Offer, including the significantly
increased interest expense and debt amortization. The Company's new credit
arrangements provide for secured collateral and contain covenants intended to
limit the Company's future actions. The Board of Directors believes that, under
the terms of these credit arrangements, the Company's financial flexibility will
be decreased and that, for example, it may not be in a position to make
opportunistic acquisitions. See Section 9. The Company's credit ratings are also
expected to decrease. The Company believes that its cash, short-term investments
and access to new credit facilities following completion of the Offer, together
with its anticipated cash flow from operations, are adequate for its needs in
the foreseeable future. See Section 2.
In view of the Company's increased leverage following the Offer, management
expects to cause the Company to be managed and operated in the future to
carefully monitor and restrict its expenditures taking into consideration, among
other things, sales levels, in order to maximize the Company's cash flow and
enable the Company to reduce its indebtedness. Management believes that these
efforts, combined with the continuing strength of the Company's trademarks and
its new and planned product lines, should enable the Company to achieve improved
operating results. However, in light of the increased leverage and uncertainty
associated with the Company's plans, the competitive environment in which the
Company operates, future economic conditions generally, the Company's
disappointing recent results and other factors, there can be no assurance that
the Company's efforts will succeed.
From time to time, including over the last 12 months, senior management of
the Company has been approached by third parties expressing an interest in
discussing the possible acquisition of, investment in or merger or combination
with the Company. However, none of these discussions resulted in any firm offers
or in any offer being recommended to the Board of Directors. In approving the
Offer, the Board of Directors reviewed the Company's strategic business plans
and was made aware of such third party discussions.
Paul Fireman, Chairman and Chief Executive Officer of the Company, together
with his wife (the "Firemans"), but excluding associated trusts which own an
aggregate of 1,525,000 Shares, beneficially own an aggregate of 10,215,158
Shares, representing approximately 14.1% of the outstanding Shares as of July
26,
5
<PAGE> 6
1996. If the Company purchases 24,000,000 Shares pursuant to the Offer, the
beneficial ownership of the Firemans (excluding associated trusts) would
increase to approximately 21.1% of the Shares outstanding immediately after the
Offer. The Company's Articles of Organization and Massachusetts law provide that
mergers and certain other extraordinary transactions require the affirmative
vote of two-thirds of the outstanding shares of corporations organized in
Massachusetts. Therefore, the proposed purchase of 24,000,000 Shares pursuant to
the Offer and the intention of the Firemans not to tender any Shares will
significantly decrease the number of additional Shares needed to veto mergers
and those other extraordinary transactions that require a two-thirds shareholder
vote to which the Firemans are opposed. The Board of Directors considered this
factor in determining to approve the Offer.
As of July 26, 1996, the Company had issued and outstanding 72,536,700
Shares and had reserved 11,070,179 Shares for issuance upon exercise of
outstanding stock options. The 24,000,000 Shares that the Company is offering to
purchase pursuant to the Offer represent approximately 33.1% of the outstanding
Shares. The Shares are listed and traded on the NYSE under the symbol "RBK". On
July 29, 1996, the last full trading day on the NYSE prior to the commencement
of the Offer, the closing per Share sales price as reported on the NYSE
Composite Tape was $34.75. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES. See Section 8.
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase 24,000,000 Shares or such lesser number of Shares as are properly
tendered (and not withdrawn in accordance with Section 4) prior to the
Expiration Date (as defined below) at prices not in excess of $36.00 nor less
than $30.00 per Share in cash. The term "Expiration Date" means 5:00 P.M., New
York City time, on Tuesday, August 27, 1996, unless and until the Company, in
its sole discretion, shall have extended the period of time during which the
Offer will remain open, in which event the term "Expiration Date" shall refer to
the latest time and date at which the Offer, as so extended by the Company,
shall expire. See Section 15 for a description of the Company's right to extend,
delay, terminate or amend the Offer. The Company reserves the right to purchase
more than Shares pursuant to the Offer. In accordance with applicable
regulations of the Securities and Exchange Commission (the "Commission"), the
Company may purchase pursuant to the Offer an additional amount of Shares not to
exceed 2% of the outstanding Shares without amending or extending the Offer. See
Section 15. In the event of an over-subscription of the Offer as described
below, Shares tendered at or below the Purchase Price prior to the Expiration
Date will be subject to proration, except for Odd Lots as explained below. The
proration period also expires on the Expiration Date.
The Company will select the lowest Purchase Price that will allow it to buy
24,000,000 Shares (or such lesser number of Shares as are properly tendered at
prices not in excess of $36.00 nor less than $30.00 per Share). All Shares
properly tendered at prices at or below the Purchase Price and not withdrawn
will be purchased at the Purchase Price, subject to the terms and the conditions
of the Offer, including the proration and conditional tender provisions. All
Shares purchased in the Offer will be purchased at the Purchase Price.
THE OFFER IS NOT CONDITIONED UPON THE TENDER OF ANY MINIMUM NUMBER OF
SHARES, BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7.
In accordance with Instruction 5 of the Letter of Transmittal, shareholders
desiring to tender Shares must specify the price, not in excess of $36.00 nor
less than $30.00 per Share, at which they are willing to sell their Shares to
the Company. As promptly as practicable following the Expiration Date, the
Company will, in its sole discretion, determine the Purchase Price that it will
pay for Shares properly tendered pursuant to the Offer and not withdrawn, taking
into account the number of Shares tendered and the prices specified by tendering
shareholders. The Company intends to select the lowest Purchase Price, not in
excess of $36.00 nor less than $30.00 net per Share in cash, that will enable it
to purchase 24,000,000 Shares (or such lesser number of Shares as are properly
tendered) pursuant to the Offer. Shares properly tendered pursuant to the Offer
at or below the Purchase Price and not withdrawn will be purchased at the
Purchase Price, subject to the terms and conditions of the Offer, including the
proration and conditional tender provisions. All Shares tendered and not
purchased pursuant to the Offer, including Shares tendered at prices in excess
of the
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Purchase Price and Shares not purchased because of proration or conditional
tender, will be returned to the tendering shareholders at the Company's expense
as promptly as practicable following the Expiration Date.
Priority of Purchasers. Upon the terms and subject to the conditions of
the Offer, if more than 24,000,000 Shares have been properly tendered at prices
at or below the Purchase Price and not withdrawn prior to the Expiration Date,
the Company will purchase properly tendered Shares on the basis set forth below:
(a) first, all Shares tendered and not withdrawn prior to the Expiration
Date by any Odd Lot Holder (as defined below) who:
(1) tenders all Shares beneficially owned by such Odd Lot Holder at a
price at or below the Purchase Price (tenders of less than all
Shares owned by such shareholder will not qualify for this
preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed
Delivery; and
(b) second, after purchase of all of the foregoing Shares, all Shares
conditionally tendered in accordance with Section 6, for which the
condition was satisfied, and all other Shares tendered properly and
unconditionally at prices at or below the Purchase Price and not
withdrawn prior to the Expiration Date, on a pro rata basis (with
appropriate adjustments to avoid purchases of fractional Shares) as
described below; and
(c) third, if necessary, Shares conditionally tendered, for which the
condition was not satisfied, at or below the Purchase Price and not
withdrawn prior to the Expiration Date, selected by random lot in
accordance with Section 6.
Odd Lots. For purposes of the Offer, the term "Odd Lots" shall mean all
Shares properly tendered prior to the Expiration Date at prices at or below the
Purchase Price and not withdrawn by any person (an "Odd Lot Holder") who owned,
beneficially or of record, as of the close of business on July 26, 1996, an
aggregate of fewer than 100 Shares (and so certified in the appropriate place on
the Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery). In order to qualify for this preference, an Odd Lot Holder must
tender all such Shares in accordance with the procedures described in Section 3.
As set forth above, Odd Lots will be accepted for payment before proration, if
any, of the purchase of other tendered Shares. This preference is not available
to partial tenders or to beneficial or record holders of an aggregate of 100 or
more Shares, even if such holders have separate accounts or certificates
representing fewer than 100 Shares. By accepting the Offer, an Odd Lot Holder
would not only avoid the payment of brokerage commissions but also would avoid
any applicable odd lot discounts in a sale of such holder's Shares. Any
shareholder wishing to tender all of such shareholder's Shares pursuant to this
Section should complete the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery.
The Company also reserves the right, but will not be obligated, to purchase
all Shares duly tendered by any shareholder who tendered all Shares owned,
beneficially or of record, at or below the Purchase Price and who, as a result
of proration, would then own, beneficially or of record, an aggregate of fewer
than 100 Shares. If the Company exercises this right, it will increase the
number of Shares that it is offering to purchase by the number of Shares
purchased through the exercise of the right.
Proration. In the event that proration of tendered Shares is required, the
Company will determine the proration factor as soon as practicable following the
Expiration Date. Proration for each shareholder tendering Shares, other than Odd
Lot Holders, shall be based on the ratio of the number of Shares tendered by
such shareholder to the total number of Shares tendered by all shareholders,
other than Odd Lot Holders, at or below the Purchase Price, subject to the
conditional tender provisions described in Section 6. Because of the difficulty
in determining the number of Shares properly tendered (including Shares tendered
by guaranteed delivery procedures, as described in Section 3) and not withdrawn,
and because of the odd lot procedure, the Company does not expect that it will
be able to announce the final proration factor or commence payment for any
Shares purchased pursuant to the Offer until approximately five NYSE trading
days after the Expiration Date. The preliminary results of any proration will be
announced by press release as promptly as practicable after the Expiration Date.
Shareholders may obtain such preliminary information from the Information Agent
or the Dealer Manager and may be able to obtain such information from their
brokers.
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This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares and will be furnished to brokers, banks and similar
persons whose names, or the names of whose nominees, appear on the Company's
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
The following discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, the matters discussed
below as well as the factors described in the Company's 1995 Annual Report (as
defined herein) and the Company's 1996 Quarterly Reports (as defined herein).
The Offer provides shareholders who are considering a sale of all or a
portion of their Shares with the opportunity to determine the price or prices
(not in excess of $36.00 nor less than $30.00 per Share) at which they are
willing to sell their Shares and, subject to the terms and conditions of the
Offer, to sell those Shares for cash without the usual transaction costs
associated with market sales. In addition, shareholders owning fewer than 100
Shares whose Shares are purchased pursuant to the Offer not only will avoid the
payment of brokerage commissions but also will avoid any applicable odd lot
discounts payable on a sale of their Shares in a NYSE transaction. The Offer
also allows shareholders to sell a portion of their Shares while retaining a
continuing equity interest in the Company. Shareholders who determine not to
accept the Offer will realize a proportionate increase in their relative equity
interest in the Company, and thus in the Company's future earnings and assets,
subject to the Company's right to issue additional Shares and other equity
securities in the future.
Over the past several years, the Company has used a substantial portion of
its excess cash to repurchase Shares through acquisition programs using open
market and negotiated purchases. During the three years ended December 31, 1995,
the Company purchased 6,235,100, 3,261,200, and 6,639,600 Shares, respectively,
and during the six months ended June 30, 1996, the Company purchased 2,255,568
Shares.
In early 1996, the Company engaged CS First Boston as its financial advisor
to assist the Company in reviewing from a financial standpoint its business,
prospects and strategies with respect to each operating unit of the Company and
its subsidiaries. Although the Company has in recent years experienced a
significant decline in its share of the U.S. footwear market, the Company has
taken steps which it believes may reverse this trend. On this basis, and on the
basis of management's review of the prospects for products expected to be
introduced in 1997, the Company believes it is in a position to achieve an
operational and financial turnaround, and that this has not yet been recognized
by the stock market. There are, however, many uncertainties associated with
accomplishment of such a turnaround. These include the decline in market share
noted above, slower growth in the U.S. footwear market, the emergence and growth
of strong competitors, the substantial and increasing investment by such
competitors in marketing and advertising, and the possibility of changing
consumer preferences. Moreover, while the Company has received initially
promising responses from certain retailers in the United States with respect to
its new and planned products, there is not yet any evidence or assurance as to
consumer response to these products, nor has the prospect of an operational or
financial turnaround been reflected in the Company's operating results.
The Board of Directors has determined that the Company's financial
condition and outlook and current market conditions, including recent trading
prices of the Shares, make this an attractive time to repurchase a significant
portion of the outstanding Shares, taking into account the significantly
increased interest expense and debt amortization and financial and operating
constraints associated with the borrowing required to fund the Offer. In the
view of the Board of Directors, the Offer represents a significant acceleration
of what would otherwise have been a continuing share repurchase program and an
attractive investment and use of the Company's cash generation abilities that
should benefit the Company and its shareholders over the long term. In
particular, the Board of Directors believes that the purchase of Shares at this
time is consistent with the Company's long term corporate goal of seeking to
increase shareholder value.
From time to time, including over the last 12 months, senior management of
the Company has been approached by third parties expressing an interest in
discussing the possible acquisition of, investment in or
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merger or combination with the Company. However, none of these discussions
resulted in any firm offers or in any offer being recommended to the Board of
Directors. In approving the Offer, the Board of Directors reviewed the Company's
strategic business plans and was made aware of such third party discussions.
The magnitude of the purchase of Shares in the Offer is substantial. The
Board of Directors took into account that the purchase of 24,000,000 Shares
would represent the retirement of approximately 33.1% of its outstanding Shares
at an aggregate cost of approximately $872 million. If the Offer were fully
subscribed and the purchase of Shares were made at the maximum per Share price,
the Company's stockholders' equity would be reduced from $890.5 million at June
30, 1996 to $18.5 million. This substantial expenditure by the Company will be
financed through a borrowing under a new term loan credit facility. See Section
9.
In deciding to approve the Offer, the Board of Directors also took into
account the expected financial impact of the Offer, including the significantly
increased interest expense and debt amortization. The Company's new credit
arrangements provide for secured collateral and contain covenants intended to
limit the Company's future actions. The Board of Directors believes that, under
the terms of these credit arrangements, the Company's financial flexibility will
be decreased and that, for example, it may not be in a position to make
opportunistic acquisitions. See Section 9. The Company's credit ratings are also
expected to decrease. The Company believes that its cash, short-term investments
and access to new credit facilities following completion of the Offer, together
with its anticipated cash flow from operations, are adequate for its needs in
the foreseeable future. However, the Company's actual experience may differ from
the expectations set forth in the preceding sentence, for reasons including
those discussed in the preceding paragraphs, as well as future events that might
have the effect of reducing the Company's available cash balances (such as
unexpected operating losses or capital or other expenditures) or that might
reduce or eliminate the availability of external financial resources.
In view of the Company's increased leverage following the Offer, management
expects to cause the Company to be managed and operated in the future to
carefully monitor and restrict its expenditures, taking into consideration,
among other things, sales levels, in order to maximize the Company's cash flow
and enable the Company to reduce its indebtedness. Management believes that
these efforts, combined with the continuing strength of the Company's trademarks
and its new and planned product lines, should enable the Company to achieve
improved operating results. However, in light of the increased leverage and
uncertainty associated with the Company's plans, the competitive environment in
which the Company operates, future economic conditions generally, the Company's
disappointing recent results and other factors, there can be no assurance that
the Company's efforts will succeed.
The dividend of $.075 per Share declared on July 25, 1996 to holders of
record on September 11, 1996 will be paid on October 2, 1996. Shares that are
purchased pursuant to the Offer prior to September 11, 1996 will not be entitled
to receive such dividend. Assuming the purchase of 24,000,000 Shares pursuant to
the Offer, the Company's Board of Directors does not currently intend to
continue to declare or pay dividends to holders of the Company's Common Stock.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH SHAREHOLDER'S SHARES AND NEITHER HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND THE
PRICE OR PRICES AT WHICH TO TENDER.
The Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer. See Section 11. The
Firemans (excluding associated trusts) beneficially own an aggregate of
10,215,158 Shares, representing approximately 14.1% of the outstanding Shares as
of July 26, 1996. If the Company purchases 24,000,000 Shares pursuant to the
Offer, the beneficial ownership of the Firemans would increase to approximately
21.1% of the Shares outstanding immediately after the Offer. The Company's
Articles of Organization and Massachusetts law provide that mergers and certain
other extraordinary transactions require the affirmative vote of two-thirds of
the outstanding shares of corporations organized in Massachusetts. Therefore,
the proposed purchase of 24,000,000 Shares pursuant to the Offer and the
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<PAGE> 10
intention of the Firemans not to tender any Shares will significantly decrease
the number of additional Shares needed to veto mergers and those other
extraordinary transactions that require a two-thirds shareholder vote to which
the Firemans are opposed. The Board of Directors considered this factor in
determining to approve the Offer.
The Company may in the future purchase additional Shares on the open
market, in private transactions, through tender offers or otherwise, subject to
the approval of the Board of Directors. Any such purchase may be on the same
terms or on terms which are more or less favorable to shareholders than the
terms of the Offer. However, Rule 13e-4 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prohibits the Company and its affiliates
from purchasing any Shares, other than pursuant to the Offer, until at least ten
business days after the Expiration Date. Any possible future purchases by the
Company will depend on many factors, including the market price of the Shares,
the results of the Offer, the Company's business and financial position and
general economic and market conditions.
Shares the Company acquires pursuant to the Offer will be restored to the
status of authorized and unissued Shares and will be available for the Company
to issue without further shareholder action (except as required by applicable
law or the rules of the NYSE or any other securities exchange on which the
Shares are listed) for purposes including, but not limited to, the acquisition
of other businesses, the raising of additional capital for use in the Company's
business and the satisfaction of obligations under existing or future employee
benefit plans. The Company has no current plans for issuance of the Shares
repurchased pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Proper Tender of Shares. For Shares to be tendered properly pursuant to
the Offer, (a) the certificates for such Shares (or confirmation of receipt of
such Shares pursuant to the procedures for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) including any required signature guarantees
and any other documents required by the Letter of Transmittal, must be received
prior to 5:00 P.M., New York City time, on the Expiration Date by the Depositary
at its address set forth on the back cover of this Offer to Purchase or (b) the
tendering shareholder must comply with the guaranteed delivery procedure set
forth below. IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL,
SHAREHOLDERS DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST PROPERLY
INDICATE IN THE SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES
ARE BEING TENDERED" ON THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF
$.125) AT WHICH THEIR SHARES ARE BEING TENDERED. Shareholders who desire to
tender Shares at more than one price must complete a separate Letter of
Transmittal for each price at which Shares are tendered, provided that the same
Shares cannot be tendered (unless properly withdrawn previously in accordance
with the terms of the Offer) at more than one price. IN ORDER TO PROPERLY TENDER
SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED IN THE APPROPRIATE SECTION ON
EACH LETTER OF TRANSMITTAL.
In addition, Odd Lot Holders who tender all such Shares must complete the
box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery, in order to qualify for the preferential
treatment available to Odd Lot Holders as set forth in Section 1.
Signature Guarantees and Method of Delivery. No signature guarantee is
required (i) if the Letter of Transmittal is signed by the registered holder of
the Shares (which term, for purposes of this Section 3, shall include any
participant in The Depository Trust Company (the "Book-Entry Transfer
Facilities") whose name appears on a security position listing as the owner of
the Shares) tendered therewith and such holder has not completed either the box
entitled "Special Delivery Instructions" on the Letter of Transmittal; or (ii)
if Shares are tendered for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company (not a savings bank or a savings and
loan association) having an office, branch or agency in the United States (each
such entity being hereinafter referred to as an "Eligible Institution"). See
Instruction 1 of the Letter of Transmittal. If a certificate for Shares is
registered in the name of a person other than the person executing a letter of
Transmittal, or if payment is to be made, or Shares not purchased or tendered
are to be issued, to a person
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other than the registered holder, then the certificate must be endorsed or
accompanied by an appropriate stock power, in either case, signed exactly as the
name of the registered holder appears on the certificate, or stock power
guaranteed by an Eligible Institution.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at the Book-Entry Transfer Facility
as described above), a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) and any other documents
required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF
DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares for purposes of the Offer at the Book-Entry Transfer Facility
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing such
facility to transfer Shares into the Depositary's account in accordance with the
Book-Entry Transfer Facility's procedures for transfer. Although delivery of
Shares may be effected through a book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility, either (i) a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof)
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Depositary at its address set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or (ii) the guaranteed delivery procedure described below must be followed.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Backup Federal Income Tax Withholding. Under the federal income tax backup
withholding rules, unless an exemption applies under the applicable law and
regulations, 31% of the gross proceeds payable to a shareholder or other payee
pursuant to the Offer must be withheld and remitted to the United States
Treasury, unless the shareholder or other payee provides his or her taxpayer
identification number (employer identification number or social security number)
to the Depositary and certifies that such number is correct. Therefore, each
tendering shareholder should complete and sign the Substitute Form W-9 included
as part of the Letter of Transmittal so as to provide the information and
certification necessary to avoid backup withholding, unless such shareholder
otherwise establishes to the satisfaction of the Depositary that it is not
subject to backup withholding. Certain shareholders (including, among others,
all corporations and certain foreign shareholders (in addition to foreign
corporations)) are not subject to these backup withholding and reporting
requirements. In order for a foreign shareholder to qualify as an exempt
recipient, that shareholder must submit an IRS Form W-8 or a Substitute Form
W-8, signed under penalties of perjury, attesting to that shareholder's exempt
status. Such statements can be obtained from the Depositary. See Instruction 14
of the Letter of Transmittal.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE TO SHAREHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH
SHAREHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH WITHHOLDING
MUST PROVIDE THE DEPOSITARY WITH THE SHAREHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL.
For a discussion of certain federal income tax consequences to tendering
shareholders, see Section 14.
Withholding For Foreign Shareholders. Even if a foreign shareholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold federal income taxes equal to 30% of the gross payments payable to
a foreign shareholder or his agent unless the Depositary determines that a
reduced rate of withholding is available pursuant to a tax treaty or that an
exemption from withholding is applicable because such gross proceeds are
effectively connected with the conduct of a trade or business within the United
States. For this purpose, a foreign shareholder is any shareholder that is not
(i) a citizen or resident
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of the United States, (ii) a corporation, partnership, or other entity created
or organized in or under the laws of the United States, any State or any
political subdivision thereof or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of the source of
such income. In order to obtain a reduced rate of withholding pursuant to a tax
treaty, a foreign shareholder must deliver to the Depositary before the payment
a properly completed and executed Form 1001. In order to obtain an exemption
from withholding on the grounds that the gross proceeds paid pursuant to the
Offer are effectively connected with the conduct of a trade or business within
the United States, a foreign shareholder must deliver to the Depositary a
properly completed and executed Form 4224. The Depositary will determine a
shareholder's status as a foreign shareholder and eligibility for a reduced rate
of, or exemption from, withholding by reference to any outstanding certificates
or statements concerning eligibility for a reduced rate of, or exemption from,
withholding (e.g., Form 1001 or Form 4224) unless facts and circumstances
indicate that such reliance is not warranted. A foreign shareholder may be
eligible to obtain a refund of all or a portion of any tax withheld if such
shareholder meets the "complete redemption", "substantially disproportionate" or
"not essentially equivalent to a dividend" test described in Section 14 or is
otherwise able to establish that no tax or a reduced amount of tax is due.
Backup withholding generally will not apply to amounts subject to the 30% or a
treaty-reduced rate of withholding. Foreign shareholders are urged to consult
their own tax advisors regarding the application of federal income tax
withholding, including eligibility for a withholding tax reduction or exemption,
and the refund procedure. See Instruction 15 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share certificates cannot be delivered to the
Depositary prior to the Expiration Date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or if time will not permit all
required documents to reach the Depositary prior to the Expiration Date, such
Shares may nevertheless be tendered, provided that all of the following
conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives by hand, mail, telegram or facsimile
transmission, prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form
the Company has provided with this Offer to Purchase (specifying the
price at which the Shares are being tendered), including (where
required) a signature guarantee by an Eligible Institution; and
(c) the certificates for all tendered Shares, in proper form for transfer
(or confirmation of book-entry transfer of such Shares into the
Depositary's account the Book-Entry Transfer Facilities), together with
a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) and any required signature
guarantees or other documents required by the Letter of Transmittal,
are received by the Depositary within three NYSE trading days after the
date of receipt by the Depositary of such Notice of Guaranteed
Delivery.
If any tendered Shares are not purchased, or if less than all Shares
evidenced by a shareholder's certificates are tendered, certificates for
unpurchased Shares will be returned as promptly as practicable after the
expiration or termination of the Offer or, in the case of Shares tendered by
book-entry transfer at a Book-Entry Transfer Facility, such Shares will be
credited to the appropriate account maintained by the tendering shareholder at
the appropriate Book-Entry Transfer Facility, in each case without expense to
such shareholder.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, the price to be paid for Shares to be accepted and the validity,
form, eligibility (including time of receipt) and acceptance of any tender of
Shares will be determined by the Company, in its sole discretion, and its
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any or all tenders of any Shares that it determines
are not in appropriate form or the acceptance for payment of or payments for
which may be unlawful. The Company also reserves the absolute right to waive any
of the conditions of the Offer or any defect or irregularity in any tender with
respect to any particular Shares or any particular shareholder. No tender of
Shares will be deemed to have been properly made until all defects or
irregularities have been cured by the tendering shareholder or waived by the
Company. None of the Company, the Dealer Manager, the
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Depositary, the Information Agent or any other person shall be obligated to give
notice of any defects or irregularities in tenders, nor shall any of them incur
any liability for failure to give any such notice.
Tendering Shareholder's Representation and Warranty; Company's Acceptance
Constitutes an Agreement. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering shareholder's acceptance of the
terms and conditions of the Offer, as well as the tendering shareholder's
representation and warranty to the Company that (a) such shareholder has a net
long position in the Shares being tendered within the meaning of Rule 14e-4
promulgated by the Commission under the Exchange Act and (b) the tender of such
Shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person,
directly or indirectly, to tender Shares for such person's own account unless,
at the time of tender and at the end of the proration period or period during
which Shares are accepted by lot (including any extensions thereof), the person
so tendering (i) has a net long position equal to or greater than the amount of
(x) Shares tendered or (y) other securities convertible into or exchangeable or
exercisable for the Shares tendered and will acquire such Shares for tender by
conversion, exchange or exercise and (ii) will deliver or cause to be delivered
such Shares in accordance with the terms of the Offer. Rule 14-e 4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person. The Company's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
shareholder and the Company upon the terms and conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
acceptances for payment by the Company pursuant to the Offer, may also be
withdrawn at any time after 12:00 Midnight, New York City time, on Tuesday,
September 24, 1996.
For a withdrawal to be effective, a notice of withdrawal must be in
written, telegraphic or facsimile transmission form and must be received in a
timely manner by the Depositary at its address set forth on the back cover of
this Offer to Purchase. Any such notice of withdrawal must specify the name of
the tendering shareholder, the name of the registered holder, if different from
that of the person who tendered such Shares, the number of Shares tendered and
the number of Shares to be withdrawn. If the certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the release of such certificates, the tendering shareholder must also
submit the serial numbers shown on the particular certificates for Shares to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution). If Shares have been tendered pursuant to the procedure for
book-entry tender set forth in Section 3, the notice of withdrawal also must
specify the name and the number of the account at the applicable Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with the procedures of such facility. None of the Company, the Dealer Manager,
the Depositary, the Information Agent or any other person shall be obligated to
give notice of any defects or irregularities in any notice of withdrawal nor
shall any of them incur liability for failure to give any such notice. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
Withdrawals may not be rescinded and any Shares withdrawn will thereafter
be deemed not properly tendered for purposes of the Offer unless such withdrawn
Shares are properly retendered prior to the Expiration Date by again following
one of the procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or
is unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain tendered Shares on behalf of the Company, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in this Section 4.
13
<PAGE> 14
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, as promptly as
practicable following the Expiration Date, the Company (i) will determine the
Purchase price it will pay for the Shares properly tendered and not withdrawn
prior to the Expiration Date, taking into account the number of Shares so
tendered and the prices specified by tendering shareholders, and (ii) will
accept for payment and pay for (and thereby purchase) Shares properly tendered
at prices at or below the Purchase Price and not withdrawn prior to the
Expiration Date. For purposes of the Offer, the Company will be deemed to have
accepted for payment (and therefore purchased) Shares that are tendered at or
below the Purchase Price and not withdrawn (subject to the proration and
conditional tender provisions of the Offer) only when, as and if it gives oral
or written notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, promptly
following the Expiration Date the Company will accept for payment and pay a
single per Share Purchase Price for 24,000,000 Shares (subject to increase or
decrease as provided in Section 15) or such lesser number of Shares as are
properly tendered at prices not in excess of $36.00 nor less than $30.00 per
Share and not withdrawn as permitted in Section 4.
The Company will pay for Shares purchased pursuant to the Offer by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from the Company and transmitting payment to the tendering shareholders.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Date; however, the Company does not expect to be able to
announce the final results of any proration and commence payment for Shares
purchased until approximately five NYSE trading days after the Expiration Date.
Certificates for all Shares tendered and not purchased, including all Shares
tendered at prices in excess of the Purchase Price and Shares not purchased due
to proration or conditional tender, will be returned (or, in the case of Shares
tendered by book-entry transfer, such Shares will be credited to the account
maintained with the Book-Entry Transfer Facility by the participant therein who
so delivered such Shares) to the tendering shareholder at the Company's expense
as promptly as practicable after the Expiration Date without expense to the
tendering shareholders. Under no circumstances will interest on the Purchase
Price be paid by the Company by reason of any delay in making payment. In
addition, if certain events occur, the Company may not be obligated to purchase
Shares pursuant to the Offer. See Section 7.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or (in the circumstances permitted by
the Offer) if unpurchased Shares are to be registered in the name of, any person
other than the registered holder, or if tendered certificates are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of all stock transfer taxes, if any (whether imposed on the
registered holder or such other person), payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of the stock transfer taxes, or exemption therefrom, is
submitted. See Instruction 7 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE FORM W-9 INCLUDED WITH THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO REQUIRED BACKUP FEDERAL INCOME TAX WITHHOLDING OF
31% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO
THE OFFER. SEE SECTION 3. ALSO SEE SECTION 3 REGARDING FEDERAL INCOME TAX
CONSEQUENCES FOR FOREIGN SHAREHOLDERS.
6. CONDITIONAL TENDER OF SHARES.
Under certain circumstances set forth in Section 1 above, the Company may
prorate the number of Shares purchased pursuant to the Offer. As discussed in
Section 14, the number of Shares to be purchased from a particular shareholder
might affect the tax consequences to such shareholder of such purchase and such
shareholder's decision whether to tender. Accordingly, a shareholder may tender
Shares subject to the condition that a specified minimum number, if any, must be
purchased, and any shareholder wishing to make such a conditional tender should
so indicate in the box captioned "Conditional Tender" on the Letter of
14
<PAGE> 15
Transmittal and, if applicable, on the Notice of Guaranteed Delivery. It is the
tendering shareholder's responsibility to calculate such minimum number of
Shares and each shareholder is urged to consult his or her own tax advisor. If
the effect of accepting tenders on a pro rata basis is to reduce the number of
Shares to be purchased from any shareholder below the minimum number so
specified, such tender will automatically be deemed withdrawn, except as
provided in the next paragraph, and Shares tendered by such shareholder will be
returned as soon as practicable after the Expiration Date.
However, if so many conditional tenders would be deemed withdrawn that the
total number of Shares to be purchased falls below 24,000,000 Shares, then, to
the extent feasible, the Company will select enough of such conditional tenders,
which would otherwise have been deemed withdrawn, to purchase such desired
number of Shares. In selecting among such conditional tenders, the Company will
select by random lot and will limit its purchase in each case to the designated
minimum number of Shares to be purchased. Conditional tenders will be selected
by lot only from shareholders who tender all of their Shares.
IN THE EVENT OF PRORATION, ANY SHARES TENDERED PURSUANT TO A CONDITIONAL
TENDER FOR WHICH THE MINIMUM REQUIREMENTS ARE NOT SATISFIED MAY NOT BE ACCEPTED
AND WILL THEREBY BE DEEMED WITHDRAWN.
7. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f)
under the Exchange Act, if at any time on or after July 29, 1996 and prior to
the time of payment for any such Shares (whether any Shares have theretofore
been accepted for payment, purchased or paid for pursuant to the Offer) any of
the following events shall have occurred (or shall have been determined by the
Company to have occurred) that, in the Company's judgment in any such case and
regardless of the circumstances giving rise thereto (including any action or
omission to act by the Company), makes it inadvisable to proceed with the Offer
or with such acceptance for payment or payment:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person,
domestic or foreign, before any court, authority, agency or tribunal
that directly or indirectly (i) challenges the making of the Offer, the
acquisition of some or all of the Shares pursuant to the Offer or
otherwise relates in any manner to the Offer, or (ii) in the Company's
sole judgment, could materially and adversely affect the business,
condition (financial or other), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, or otherwise materially
impair in any way the contemplated future conduct of the business of
the Company or any of its subsidiaries or materially impair the
contemplated benefits of the Offer to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the
Company or any of its subsidiaries, by any court or any authority,
agency or tribunal that, in the Company's sole judgment, would or might
directly or indirectly (i) make the acceptance for payment of, or
payment for, some or all of the Shares illegal or otherwise restrict or
prohibit consummation of the Offer; (ii) delay or restrict the ability
of the Company, or render the Company unable, to accept for payment or
pay for some or all of the Shares; (iii) materially impair the
contemplated benefits of the Offer to the Company; or (iv) materially
and adversely affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or any of
its subsidiaries;
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities
exchange or in the over-the-counter market; (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States; (iii) the commencement of a war, armed hostilities
or other international or national calamity
15
<PAGE> 16
directly or indirectly involving the United States; (iv) any limitation
(whether or not mandatory) by any governmental, regulatory or
administrative agency or authority on, or any event that, in the
Company's sole judgment, might affect, the extension of credit by banks
or other lending institutions in the United States; (v) any significant
decrease in the market price of the Shares or any change in the general
political, market, economic or financial conditions in the United
States or abroad that could, in the sole judgment of the Company, have
a material adverse effect on the Company's business, operations or
prospects or the trading in the Shares; (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or (vii) any decline in
either the Dow Jones Industrial Average or the Standard and Poor's
Index of 500 Industrial Companies by an amount in excess of 10%
measured from the close of business on July 29, 1996;
(d) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger or acquisition proposal for the
Company, shall have been proposed, announced or made by another person
or shall have been publicly disclosed, or the Company shall have
learned that (i) any person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire beneficial ownership of more than 5% of the outstanding Shares,
or any new group shall have been formed that beneficially owns more
than 5% of the outstanding Shares; or
(e) any change or changes shall have occurred in the business, financial
condition, assets, income, operations, prospects or stock ownership of
the Company or its subsidiaries that, in the Company's sole judgment,
is or may be material to the Company or its subsidiaries.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, and may be waived by
the Company, in whole or in part, at any time and from time to time in its sole
discretion. The Company's failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by the Company concerning the events described above
will be final and binding.
8. PRICE RANGE OF SHARES; DIVIDENDS.
<TABLE>
The Shares are listed and traded on the NYSE. The following table sets
forth, for the periods indicated, the high and low closing per Share sales
prices on the NYSE Composite Tape as compiled from published financial sources
and the cash dividends paid, or to be paid, per Share in each such fiscal
quarter:
<CAPTION>
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
1994:
1st Quarter......................................... $ 35.75 $ 29.75 $.075
2nd Quarter......................................... 34.125 28.375 .075
3rd Quarter......................................... 38.625 29.125 .075
4th Quarter......................................... 40.25 35.625 .075
1995:
1st Quarter......................................... $39.625 $33.625 $.075
2nd Quarter......................................... 37.50 31.125 .075
3rd Quarter......................................... 37.875 32.875 .075
4th Quarter......................................... 36.25 24.125 .075
1996:
1st Quarter......................................... $31.375 $25.375 $.075
2nd Quarter......................................... 33.75 26.00 .075
3rd Quarter (through July 26, 1996)................. 34.125 29.25 .075
</TABLE>
On July 26, 1996, the last full trading day on the NYSE prior to the
announcement of the Offer, the closing per Share sales price on the NYSE
Composite Tape was $31.25. On July 29, 1996, the last full trading day on the
NYSE prior to the commencement of the Offer, the closing per Share sales price
on the NYSE
16
<PAGE> 17
Composite Tape was $34.75. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
The Company's Board of Directors has declared a dividend of $.075 per Share
to holders of record of the Company's Common Stock on September 11, 1996, to be
paid on or about October 2, 1996. Shares that are purchased pursuant to the
Offer prior to September 11, 1996 will not be entitled to receive such dividend.
Assuming the purchase of 24,000,000 Shares pursuant to the Offer, the Company's
Board of Directors does not currently intend to continue to declare or pay
dividends to holders of the Company's Common Stock. See Section 2.
9. SOURCE AND AMOUNT OF FUNDS.
Assuming the Company purchases 24,000,000 Shares pursuant to the Offer at a
purchase price of $36.00 per Share, the Company expects the maximum aggregate
cost to be approximately $872,000,000. It is anticipated that the Company will
fund the purchase of Shares pursuant to the Offer and the payment of related
fees and expenses by borrowings under a $950,000,000 six-year senior secured
term loan facility (the "Term Facility") pursuant to a Commitment Letter dated
July 28, 1996 (the "Commitment Letter") between Credit Suisse and the Company.
Under the Commitment Letter, Credit Suisse will also provide to the Company
a $750,000,000 six-year senior secured revolving credit facility (the "Revolving
Credit Facility", and collectively with the Term Facility, the "Credit
Facilities"), which will be available to the Company and its subsidiaries for
working capital purposes in the ordinary course of business. Although Credit
Suisse has committed to provide the Credit Facilities on the terms set forth in
the Commitment Letter, it expects to act as agent for a syndicate of financial
institutions to provide all or a portion of the Credit Facilities.
The Company may elect that all or a portion of the borrowings under the
Credit Facilities bear interest at a rate per annum equal to (a) the higher of
(i) the rate of interest publicly announced by Credit Suisse as its prime rate
in effect at its principal office in New York City and (ii) the federal funds
effective rate from time to time plus 0.5%, plus in either case the Applicable
Margin (as defined below) (loans bearing interest at such rate being referred to
as "ABR Loans"); or (b) the rate (grossed up for maximum statutory reserve
requirements for Eurocurrency liabilities) at which Eurocurrency deposits in the
relevant denomination currency for one, two, three or six months (as selected by
the Company) are offered by Credit Suisse in the relevant interbank Eurocurrency
market, plus the Applicable Margin (loans bearing interest at such rate being
referred to as "Eurocurrency Loans").
On each day when the Company is not maintaining an Investment Grade Rating
(as defined in the Commitment Letter), the Applicable Margin will be a rate per
annum ranging from 0 basis points ("bp") to 125 bp for ABR Loans and from 50 bp
to 225 bp for Eurocurrency Loans, based on the ratio of the Company's total debt
to its earnings before interest, taxes, depreciation and amortization within a
range of 1.25x to 4.25x. On each day when the Company is maintaining an
Investment Grade Rating, the Applicable Margin will be zero for ABR Loans and
will be a rate per annum ranging from 50 bp to 65 bp for Eurocurrency Loans,
based on the rating then assigned to the senior, unsecured long-term debt of the
Company by Standard & Poor's and Moody's.
<TABLE>
Outstanding loans under the Term Facility must be repaid in quarterly
installments based upon the annual amounts set forth below
<CAPTION>
YEAR AMOUNT
- ---- ------
<S> <C>
1997 $ 75,000,000
1998 125,000,000
1999 150,000,000
2000 150,000,000
2001 210,000,000
2002 240,000,000
</TABLE>
Prior to the date on which the Company achieves an Investment Grade Rating,
the amount outstanding under the Term Facility must be prepaid with (a) the net
proceeds of asset sales by the Company and its
17
<PAGE> 18
subsidiaries (subject to a minimum amount to be mutually agreed upon); (b) the
net proceeds of the incurrence of debt by the Company and its subsidiaries
(subject to certain exceptions to be mutually agreed upon); (c) the net cash
proceeds of the offering and sale of equity by the Company and its subsidiaries
(other than (i) the sale or exercise of stock options, (ii) the sale of stock
under employee stock purchase plans and (iii) the sale of stock and/or stock
options under employee stock ownership or incentive plans); (d) insurance
proceeds and revenues, to the extent that they exceed the replacement cost or to
the extent that the Company and its subsidiaries are not diligently proceeding
to replace the property; and (e) 50% of excess cash flow for each fiscal year of
the Company and its subsidiaries. All such prepayments shall be applied ratably
to the remaining installments of the outstanding principal under the Term
Facility or, to the extent that no amounts are outstanding under the Term
Facility, to the reduction of outstanding loans under the Revolving Credit
Facility. The outstanding amount of all borrowings under the Revolving Credit
Facility will be payable at the end of the six-year term of that Facility.
Outstanding amounts under the Credit Facilities may be prepaid and commitments
may be reduced by the Company in minimum amounts to be agreed upon.
Each of the direct and indirect domestic subsidiaries of the Company will
guarantee the Credit Facilities. The Credit Facilities (together with certain
other existing indebtedness of the Company) will be secured by a first priority,
perfected security interest in: (a) 100% of the issued and outstanding capital
stock of each domestic subsidiary of the Company; (b) 65% of the issued and
outstanding capital stock of each first-tier foreign subsidiary of the Company;
and (c) substantially all other assets of the Company and its domestic
subsidiaries (including, without limitation, inventory, accounts receivable and
intellectual property). The collateral described above will be released upon the
request of the Company at any time when the Company has an Investment Grade
Rating.
The Commitment Letter provides that the availability of the Credit
Facilities will be subject to the satisfaction of certain customary conditions,
including but not limited to the execution of definitive loan documentation, the
accuracy of representations and warranties and the absence of any default. The
Commitment Letter provides for representations, warranties and covenants of the
Company customary for credit facilities of this kind. The covenants are expected
to include (i) financial covenants with respect to the Company's maximum
leverage ratio and minimum interest coverage and fixed charge coverage ratios,
(ii) restrictions on indebtedness, mergers, consolidations, liquidations and
dissolutions, sales of assets, dividends and other payments in respect of
capital stock, capital expenditures and changes in lines of business and (iii)
restrictions on liens and pledging of assets. The Commitment Letter provides
that events of default, subject to grace periods and baskets where applicable,
will include, among other things, (i) failure to make payments when due, (ii)
violation of covenants, (iii) inaccuracy of representations and warranties, (iv)
cross default on material debt, (v) material judgements and (vi) bankruptcy.
The Company currently anticipates that borrowings under the Credit
Facilities will be repaid out of cash generated from the Company's operations.
The preceding summary of the Commitment Letter is qualified in its entirety
by reference to the text of the Commitment Letter, which is filed as an exhibit
to the Issuer Tender Offer Statement on Schedule 13E-4 (the "Schedule 13E-4") of
which this Offer to Purchase forms a part. A copy of the Schedule 13E-4 may be
obtained from the Commission in the manner provided in Section 10 under the
heading "-- Additional Information."
10. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL
The Company, a Massachusetts corporation organized on July 26, 1979, is a
global company engaged primarily in the design and marketing of sports and
fitness products, including footwear and apparel, as well as the design and
marketing of footwear and apparel for non-athletic "casual" use. The Company has
two major business groups: the Reebok Division, which is primarily responsible
for the Company's REEBOK(R) brand, and the Specialty Business Group, which is
responsible for the Company's other major brands, including the GREG NORMAN(TM)
brand and the Company's subsidiary The Rockport Company, Inc.
18
<PAGE> 19
CERTAIN FINANCIAL INFORMATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
Set forth below is certain summary historical consolidated financial
information of the Company and its subsidiaries. The historical financial
information (other than the ratios of earnings to fixed charges) were derived
from the audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 (the "Company's
1995 Annual Report"), and from the unaudited summary consolidated financial
statements included in the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31 and June 30, 1996 (the "Company's 1996 Quarterly
Reports"), each of which is hereby incorporated herein by reference, and other
information and data contained in the Company's 1995 Annual Report and the
Company's 1996 Quarterly Reports. More comprehensive financial information is
included in such reports and the financial information which follows is
qualified in its entirety by reference to such reports and all of the financial
statements and related notes contained therein, copies of which may be obtained
as set forth below under the caption "-- Additional Information."
<CAPTION>
UNAUDITED
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
------------------------- -------------------------
1996 1995(1) 1995(1) 1994
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................. $1,720,495 $1,724,170 $3,481,450 $3,280,418
Net income................................ 68,228 87,321 164,798 254,478
Net income per common share............... $ 0.92 $ 1.07 $ 2.07 $ 3.02
Average number of common shares
outstanding............................. 74,540 81,625 79,487 84,311
Ratio of earnings to fixed charges(2)..... 6.6 9.9 7.6 16.2
BALANCE SHEET DATA:
Total assets.............................. $1,796,094 $1,891,775 $1,656,223 $1,649,461
Working capital........................... 891,469 925,222 910,981 831,856
Notes payable and long term debt.......... 397,308 396,530 321,806 200,826
Stockholders' equity...................... 890,526 994,880 895,289 990,505
Book value per common share(3)............ $ 12.46 $ 12.67 $ 11.97 $ 12.24
<FN>
NOTES TO SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(1) Financial data for the 1995 periods presented include after-tax special
charges of $11,235 ($0.14 per Share) recorded in the second quarter and
$33,699 recorded in the fourth quarter pertaining to facilities
consolidation and severance and other related costs associated with the
streamlining of certain operations and the anticipated sale of Avia,
respectively (total of $44,934 or $0.57 per Share for the year).
(2) The ratios of earnings to fixed charges were computed by dividing pretax
income before fixed charges by the fixed charges. Earnings consist of pretax
income, to which has been added fixed charges. Fixed charges consist of
interest and debt expense and one-third of rent expense, which approximates
the interest factor.
(3) Book value per common share is calculated as total stockholders' equity
divided by the number of common shares outstanding at the end of the period.
</TABLE>
19
<PAGE> 20
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
<TABLE>
The following summary unaudited consolidated pro forma financial
information gives effect to the purchase of Shares pursuant to the Offer, based
on certain assumptions described in the Notes to Summary Unaudited Consolidated
Pro Forma Financial Information and gives effect to the purchase of Shares
pursuant to the Offer as if it had occurred on January 1, 1996 and January 1,
1995, with respect to income statement data and on June 30, 1996 and December
31, 1995, with respect to balance sheet data. The summary unaudited consolidated
pro forma financial information should be read in conjunction with the summary
consolidated historical financial information and does not purport to be
indicative of the results that would actually have been obtained had the
purchase of the Shares pursuant to the Offer been completed at the dates
indicated or that may be obtained in the future.
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996 YEAR ENDED DECEMBER 31, 1995
-------------------------------------- --------------------------------------
PRO FORMA PRO FORMA
------------------------- -------------------------
ASSUMED $30 ASSUMED $36 ASSUMED $30 ASSUMED $36
PER SHARE PER SHARE PER SHARE PER SHARE
UNAUDITED PURCHASE PURCHASE PURCHASE PURCHASE
HISTORICAL PRICE PRICE HISTORICAL PRICE PRICE
---------- ----------- ----------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $1,720,495 $1,720,495 $1,720,495 $3,481,450 $3,481,450 $3,481,450
Net income................ 68,228 47,719 44,187 164,798 123,781 116,715
Net income per common
share................... $ 0.92 $ 0.94 $ 0.87 $ 2.07 $ 2.23 $ 2.10
Average number of common
shares outstanding...... 74,540 50,540 50,540 79,487 55,487 55,487
Ratio of earnings to fixed
charges................. 6.6 2.5 2.2 7.6 2.9 2.6
BALANCE SHEET DATA:
Total assets.............. $1,796,094 $1,823,094 $1,826,094 $1,656,223 $1,683,223 $1,686,223
Working capital........... 891,469 891,469 891,469 910,981 910,981 910,981
Notes payable and long
term debt............... 397,308 1,152,308 1,299,308 321,806 1,076,806 1,223,806
Stockholders' equity...... 890,526 162,526 18,526 895,289 167,289 23,289
Book value per common
share................... $ 12.46 $ 3.43 $ 0.39 $ 11.97 $ 3.29 $ 0.46
<FN>
NOTES TO SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following assumptions regarding the Offer were made in determining the pro
forma financial information:
(1) Financial data for 1995 includes special charges ($44,934 after-tax or $0.57
per share) related to the anticipated sale of Avia ($33,699) and facilities
consolidation and severance and other related costs associated with the
streamlining of certain operations ($11,235).
(2) The information assumes 24,000,000 Shares are purchased at $30 per Share and
$36 per Share, with the purchase being financed with the proceeds from a
long-term borrowing of $755,000,000 and $902,000,000, respectively, bearing
interest at 7.375%. Bank fees incurred in connection with the long-term
borrowings have been capitalized as deferred financing costs and amortized
over the life of the borrowing.
(3) Expenses directly related to the Offer are assumed to be $8,000,000 and are
included as part of the cost of the Shares acquired.
(4) The pro forma financial information assumes that none of the 9,725,208
Shares exercisable under the Company's stock option plan are purchased
pursuant to the Offer.
(5) The ratios of earnings to fixed charges were computed by dividing pretax
income before fixed charges by the fixed charges. Earnings consist of pretax
income, to which has been added fixed charges. Fixed charges consist of
interest and debt expense and one-third of rent expense, which approximates
the interest factor.
(6) Book value per common share is calculated as total stockholders' equity
divided by the number of common shares outstanding at the end of the period.
</TABLE>
20
<PAGE> 21
ADDITIONAL INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is obligated to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
proxy statements distributed to the Company's shareholders and filed with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 2120, Washington, D.C. 20549; at its
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and 7 World Trade Center, New York, New York 10048. Copies
of such material may also be obtained by mail, upon payment of the Commission's
customary charges, from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Web site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy statements and other information concerning the Company also can
be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005, on which the Shares are listed.
11. INTEREST OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING
SHARES.
As of July 26, 1996, the Company had issued and outstanding 72,536,700
Shares and had reserved for issuance upon exercise of outstanding stock options
11,070,179 Shares. The 24,000,000 Shares that the Company is offering to
purchase represent approximately 33.1% of the Shares then outstanding. As of
July 26, 1996 , the Company's directors and executive officers as a group (15
persons) beneficially owned an aggregate of 8,958,764 Shares representing
approximately 12.4% of the outstanding Shares, assuming the exercise by such
persons of their currently exercisable options. As of July 26, 1996, the
Firemans beneficially owned an aggregate of 10,215,158 Shares, representing
approximately 14.1% of the outstanding Shares, assuming the exercise by such
persons of their currently exercisable options. Each of the Firemans and each of
the Company's other executive officers and directors has advised the Company
that he or she does not intend to tender any Shares pursuant to the Offer. If
the Company purchases 24,000,000 Shares pursuant to the Offer, then after the
purchase of Shares pursuant to the Offer, the Company's executive officers and
directors as a group would own beneficially approximately 18.5% and the Firemans
would own beneficially approximately 21.1% of the outstanding Shares immediately
after the Offer, assuming the exercise by such persons of their currently
exercisable options.
Except as set forth in Schedule A, neither the Company, nor any subsidiary
of the Company nor, to the best of the Company's knowledge, any of the Company's
directors or executive officers, nor any affiliates of any of the foregoing, had
any transactions involving the Shares during the 40 business days prior to the
date hereof.
Except for outstanding options to purchase Shares granted from time to time
to certain employees (including executive officers) of the Company pursuant to
the Company's stock option plans and except as otherwise described herein,
neither the Company nor, to the best of the Company's knowledge, any of its
affiliates, directors or executive officers, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the Offer with respect to any securities of the
Company including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies, consents or
authorizations.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise be traded publicly and may reduce the
number of shareholders. Nonetheless, the Company anticipates that there will be
a sufficient number of Shares outstanding and publicly traded following
consummation of the Offer to ensure a continued trading market for the Shares.
Based upon published
21
<PAGE> 22
guidelines of the NYSE, the Company does not believe that its purchase of Shares
pursuant to the Offer will cause the Company's remaining Shares to be delisted
from the NYSE.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit to their customers using such Shares as collateral. The Company
believes that, following the purchase of Shares pursuant to the Offer, the
Shares will continue to be "margin securities" for purposes of the Federal
Reserve Board's margin regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its shareholders
and the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's shareholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company is not aware of any license or regulatory permit that appears
to be material to the Company's business that might be adversely affected by the
Company's acquisition of Shares as contemplated herein or of any approval or
other action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
acquisition or ownership of Shares by the Company as contemplated herein. Should
any such approval or other action be required, the Company presently
contemplates that such approval or other action will be sought. The Company is
unable to predict whether it may determine that it is required to delay the
acceptance for payment of or payment for Shares tendered pursuant to the
Offering pending the outcome of any such matter. There can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. The Company's obligations under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 7.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary describes certain United States federal income tax
consequences relevant to the Offer. The discussion contained in this summary is
based upon the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations promulgated thereunder,
administrative pronouncements and judicial decisions, changes to which could
materially affect the tax consequences described herein and could be made on a
retroactive basis.
This summary discusses only Shares held as capital assets, within the
meaning of Section 1221 of the Code, and does not address all of the tax
consequences that may be relevant to particular shareholders in light of their
personal circumstances, or to certain types of shareholders (such as certain
financial institutions, dealers in securities or commodities, insurance
companies, tax-exempt organizations or persons who hold Shares as a position in
a straddle). In particular, the discussion of the consequences of an exchange of
Shares for cash pursuant to the Offer applies only to a United States
shareholder (herein, a "Holder"). For purposes of this summary, a "United States
shareholder" is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States, any State or any political subdivision thereof, or
(iii) an estate or trust the income of which is subject to United States federal
income taxation regardless of source. This discussion does not address the tax
consequences to foreign shareholders who will be subject to United States
federal income tax on a net basis on the proceeds of their exchange of Shares
pursuant to the Offer because such income is effectively connected with the
conduct of a trade or business within the United States. Such shareholders are
generally taxed in a manner similar to United States shareholders; however,
certain special rules apply. Foreign shareholders who are not subject to U.S.
federal income tax on a net basis should see Section 3 for a discussion of the
applicable U.S. withholding rules and the potential for obtaining a refund of
all or a portion of the tax withheld. The summary may not be applicable with
respect to Shares acquired as compensation (including Shares acquired upon the
exercise of options or which were or are subject to forfeiture restrictions).
The summary also does not address the state, local or foreign tax consequences
of participating in the Offer. Each Holder of Shares should consult such
Holder's tax advisor as to the particular consequences to him of participation
in the Offer.
22
<PAGE> 23
Consequences to Tendering Shareholders of Exchange of Shares for Cash
Pursuant to the Offer. An exchange of Shares for cash in the Offer by a Holder
will be a taxable transaction for United States federal income tax purposes. As
a consequence of the exchange, the Holder will, depending on such Holder's
particular circumstances, be treated either as recognizing gain or loss from the
disposition of the Shares or as receiving a dividend distribution from the
Company. In general, if a Holder does not exercise control over the affairs of
the Company and all Shares actually or constructively owned by such Holder under
the applicable attribution rules are tendered and exchanged for cash in the
Offer, the Holder should be treated as recognizing gain or loss from the
disposition of Shares.
Under Section 302 of the Code, a Holder will recognize gain or loss on an
exchange of Shares for cash if the exchange (i) results in a "complete
termination" of all such Holder's equity interest in the Company, (ii) results
in a "substantially disproportionate" redemption with respect to such Holder or
(iii) is "not essentially equivalent to a dividend" with respect to the Holder.
In applying each of the Section 302 tests, a Holder is in general deemed to
constructively own the Shares actually owned by certain related individuals and
entities. For example, an individual Holder is generally considered to own the
Shares owned directly or indirectly by or for his or her spouse and his or her
children, grandchildren and parents. In addition, a Holder is considered to own
a proportionate number of the Shares owned by trusts or estates in which the
Holder has a beneficial interest, by partnerships in which the Holder is a
partner, and by corporations in which the Holder owns, directly or indirectly,
50% or more in value of the stock. Similarly, Shares directly or indirectly
owned by beneficiaries of estates or trusts, by partners of partnerships and,
under certain circumstances, by shareholders of corporations may be considered
owned by these entities. A Holder will generally also be deemed to own Shares
which the Holder has the right to acquire by exercise of an option.
A Holder that exchanges all Shares actually or constructively owned by such
Holder for cash pursuant to the Offer will be regarded as having completely
terminated such Holder's equity interest in the Company. A Holder that exchanges
all Shares actually owned for cash pursuant to the Offer, but is not treated as
having disposed of all Shares constructively owned pursuant to the Offer because
of the application of the family attribution rules described above, may
nevertheless be able to qualify his exchange as a "complete termination" of his
interest in the Company if certain technical requirements are met. Among other
requirements, a Holder must include a statement with his 1996 federal income tax
return notifying the Service that he has elected to waive the family attribution
rules and agreeing to provide certain information in the future, and must not
have any interest in the Company immediately after the disposition (including an
interest as an officer, director or employee), other than an interest as a
creditor. A Holder wishing to satisfy the "complete termination" test through
waiver of the family attribution rules should consult his tax advisor. An
exchange of Shares for cash will be a "substantially disproportionate"
redemption with respect to a Holder if the percentage of the then outstanding
Shares owned by such Holder immediately after the exchange is less than 80% of
the percentage of the Shares owned by such Holder immediately before the
exchange. If an exchange of Shares for cash fails to satisfy the "substantially
disproportionate" test, the Holder may nonetheless satisfy the "not essentially
equivalent to a dividend" test. A Holder who wishes to satisfy (or avoid) the
"not essentially equivalent to a dividend" test is urged to consult such
Holder's tax advisor because this test will be met only if the reduction in such
Holder's proportionate interest in the Company constitutes a "meaningful
reduction" given such Holder's particular facts and circumstances. The IRS has
indicated in published rulings that any reduction in the percentage interest of
a shareholder whose relative stock interest in a publicly held corporation is
minimal (an interest of less than 1% should satisfy this requirement) and who
exercises no control over corporate affairs should constitute such a "meaningful
reduction." If a Holder sells Shares to persons other than the Company at or
about the time such Holder also sells shares to the Company pursuant to the
Offer, and the various sales effected by the Holder are part of an overall plan
to reduce or terminate such Holder's proportionate interest in the Company, then
the sales to persons other than the Company may, for federal income tax
purposes, be integrated with the Holder's sale of Shares pursuant to the Offer
and, if integrated, may be taken into account in determining whether the Holder
satisfies any of the three tests described above. A Holder should consult his
tax advisor regarding the treatment of other exchanges of Shares for cash which
may be integrated with such Holder's sale of Shares to the Company pursuant to
the Offer.
If a Holder is treated as recognizing gain or loss from the disposition of
Shares for cash, such gain or loss will be equal to the difference between the
amount of cash received and such Holder's tax basis in the Shares exchanged
therefor. Any such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the holding period of the Shares exceeds one
year as of the date of the exchange. Gain or loss must be
23
<PAGE> 24
determined separately for each block of Shares (that is, Shares acquired at the
same cost in a single transaction) that is exchanged for cash. A Holder may be
able to designate (generally through its broker) which blocks of Shares are
tendered pursuant to the Offer if less than all of such Holder's Shares are
tendered, and the order in which different blocks would be exchanged for cash,
in the event of proration pursuant to the Offer. Each Holder should consult such
Holder's tax advisor concerning the mechanics and desirability of such a
designation.
If a Holder is not treated under the Section 302 tests as recognizing gain
or loss on an exchange of Shares for cash, the entire amount of cash received by
such Holder in such exchange will be treated as a dividend to the extent of the
Company's current and accumulated earnings and profits. Such a dividend will be
includible in the Holder's gross income as ordinary income in its entirety,
without reduction for the tax basis of the Shares exchanged, and no loss will be
recognized. The Holder's tax basis in the Shares exchanged, however, will be
added to such Holder's tax basis in the remaining Shares that it owns. To the
extent that cash received in exchange for Shares is treated as a dividend to a
corporate Holder, (i) it will be eligible for a dividends-received deduction
(subject to applicable limitations) and (ii) it will be subject to the
"extraordinary dividend" provisions of the Code. A corporate Holder should
consult its tax advisor concerning the availability of the dividends-received
deduction and the application of the "extraordinary dividend" provisions of the
Code.
The Company cannot predict whether or the extent to which the Offer will be
oversubscribed. If the Offer is oversubscribed, proration of tenders pursuant to
the Offer will cause the Company to accept fewer shares than are tendered.
Therefore, a Holder can be given no assurance that a sufficient number of such
Holder's Shares will be purchased pursuant to the Offer to ensure that such
purchase will be treated as a sale or exchange, rather than as a dividend, for
federal income tax purposes pursuant to the rules discussed above. However, see
Section 6 regarding a Holder's right to tender Shares subject to the condition
that a specified minimum number of such Shares must be purchased (if any are
purchased).
Consequences to Shareholders who do not Tender Pursuant to the
Offer. Shareholders who do not accept the Company's Offer to tender their
Shares will not incur any tax liability as a result of the consummation of the
Offer.
See Section 3 with respect to the application of federal income tax
withholding to payments made to foreign shareholders and backup withholding.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE OFFER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
15. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 7 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. The Company also expressly reserves the right, in its sole
discretion, to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence of any of the
conditions specified in Section 7 hereof by giving oral or written notice of
such termination or postponement to the Depositary and making a public
announcement thereof. The Company's reservation of the right to delay payment
for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that the Company must pay the
consideration offered or return the Shares tendered promptly after termination
or withdrawal of a tender offer. Subject to compliance with applicable law, the
Company further reserves the right, in its sole discretion, and regardless of
whether any of the events set forth in Section 7 shall have occurred or shall be
deemed by the Company to have occurred, to amend the Offer in any respect
(including, without limitation, by decreasing or increasing the consideration
offered in the Offer to holders of Shares or by decreasing or increasing the
number of Shares being sought in the Offer). Amendments to the Offer may be made
at any time and from time to time effected
24
<PAGE> 25
by public announcement thereof, such announcement, in the case of an extension,
to be issued no later than 9:00 a.m., New York City time, on the next business
day after the last previously scheduled or announced Expiration Date. Any public
announcement made pursuant to the Offer will be disseminated promptly to
shareholders in a manner reasonably designated to inform shareholders of such
change. Without limiting the manner in which the Company may choose to make a
public announcement, except as required by applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which an offer must remain open following material changes
in the terms of the Offer or information concerning the Offer (other than a
change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of such terms or
information. If (i) the Company increases or decreases the price to be paid for
Shares, the number of Shares being sought in the Offer or the Dealer Manager's
soliciting fees and, in the event of an increase in the number of Shares being
sought, such increase exceeds 2% of the outstanding Shares, and (ii) the Offer
is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that such notice
of an increase or decrease is first published, sent or given in the manner
specified in this Section 15, the Offer will be extended until the expiration of
such period of ten business days.
16. FEES AND EXPENSES.
The Company has retained CS First Boston to act as its financial advisor,
as well as the Dealer Manager, in connection with the Offer. CS First Boston
will receive a fee for its services of $4,000,000. The Company also has agreed
to reimburse CS First Boston for certain out-of-pocket expenses incurred in
connection with the Offer, including fees and expenses of counsel, and to
indemnify CS First Boston against certain liabilities in connection with the
Offer, including liabilities under the federal securities laws. CS First Boston
has rendered various investment banking and other advisory services to the
Company in the past, for which it has received customary compensation, and may
render similar services to the Company in the future.
The Company has retained MacKenzie Partners, Inc. to act as Information
Agent and The First National Bank of Boston to act as Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telegraph and personal interviews and may request brokers, dealers
and other nominee shareholders to forward materials relating to the Offer to
beneficial owners. The Information Agent and the Depositary will each receive
reasonable and customary compensation for their respective services, will be
reimbursed by the Company for certain reasonable out-of-pocket expenses and will
be indemnified against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws.
No fees or commissions will be payable to brokers, dealers or other persons
(other than fees to the Dealer Manager, the Information Agent and the Depositary
as described above) for soliciting tenders of Shares pursuant to the Offer. The
Company, however, upon request, will reimburse brokers, dealers and commercial
banks for customary mailing and handling expenses incurred by such persons in
forwarding the Offer and related materials to the beneficial owners of Shares
held by any such person as a nominee or in a fiduciary capacity. No broker,
dealer, commercial bank or trust company has been authorized to act as the agent
of the Company, the Dealer Manager, the Information Agent or the Depositary for
purposes of the Offer. The Company will pay or cause to be paid all stock
transfer taxes, if any, on its purchase of Shares except as otherwise provided
in Instruction 7 in the Letter of Transmittal.
17. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction. In any jurisdiction the
securities or blue sky laws of which require the Offer to be made by a licensed
broker or dealer,
25
<PAGE> 26
the Offer is being made on the Company's behalf by the Dealer Manager or one or
more registered brokers or dealers licenses under the laws of such jurisdiction.
Pursuant to Rule 13e-4 of the General Rules and Regulations under the
Exchange Act, the Company has filed with the Commission an Issuer Tender Offer
Statement on Schedule 13E-4 which contains additional information with respect
to the Offer. Such Schedule 13E-4, including the exhibits and any amendments
thereto, may be examined, and copies may be obtained, at the same places and in
the same manner as is set forth in Section 10 with respect to information
concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY OR THE DEALER MANAGER IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED
LETTER OF TRANSMITTAL IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEALER
MANAGER.
REEBOK INTERNATIONAL LTD.
July 30, 1996
26
<PAGE> 27
SCHEDULE A
CERTAIN TRANSACTIONS INVOLVING SHARES
Except as set forth below, to the best of the Company's knowledge, no
transaction in Shares has been effected during the 40 business days preceding
July 30, 1996 by the Company, any executive officer, director, associate,
controlling person or subsidiary of the Company, or any executive officer or
director of any such controlling person or subsidiary:
1. The Company repurchased 331,300 Shares at various prices on various
dates pursuant to its ongoing share repurchase program.
2. Pursuant to its 1994 Equity Incentive Plan, on June 4, 1996, the Company
granted an option to purchase 250,000 Shares at fair market value on that date
to an independent contractor. Also pursuant to such Plan, on July 26, 1996, the
Company granted options to purchase an aggregate of 1,636,470 Shares at $31.25
to certain employees of the Company, of which options to purchase an aggregate
of 1,234,000 Shares were granted to the following executive officers: Messrs.
Douglas, Duncan, Fireman, Meers, Martinez and Watchmaker.
3. Pursuant to its Employee Stock Purchase Plan, for the six-month period
ended June 30, 1996, the Company issued an aggregate of 88,120 Shares at
$24.0125 per Share to certain employees, of which 442 Shares were issued to each
of the following executive officers: Messrs. Douglas, Duncan, Meers and
Watchmaker.
4. On June 10, 1996, the Paul and Phyllis Fireman Trust sold 25,000 Shares
at $31.50 per Share. On each of June 18, 1996, June 19, 1996 and June 28, 1996,
the PFP Charitable Trust sold 20,000 Shares at $32.625 per Share, 10,000 Shares
at $33.125 per Share and 10,000 Shares at $32.50 per Share, respectively.
5. Pursuant to its Equity and Deferred Compensation Plan for Directors, on
July 1, 1996, the Company issued an aggregate of 932.06 Shares at $32.75 per
Share to the following Directors: Messrs. Lee, Glavin, Quelch and Jackson and
Ms. Barad. Pursuant to such Plan, on July 2, 1996, the Company issued an
aggregate of 14.23 Shares at $33.25 per Share to the same five Directors.
A-1
<PAGE> 28
Facsimile copies of the Letter of Transmittal will be accepted from
Eligible Institutions. The Letter of Transmittal and certificates for Shares and
any other required documents should be sent or delivered by each shareholder or
his broker, dealer, commercial bank, trust company or nominee to the Depositary
at one of its addresses set forth below.
The Depositary for the Offer is:
THE FIRST NATIONAL BANK OF BOSTON
<TABLE>
<S> <C> <C>
By Mail: By Hand:
The First National Bank of Boston BancBank Trust Company
Shareholder Services Division of New York
P.O. Box 1889 55 Broadway, Third Floor
Mail Stop 45-01-19 New York, New York
Boston, Massachusetts 02105
By Facsimile Transmission: Telephone: By Overnight Courier:
(617) 575-2232 (617) 575-2700 The First National Bank of Boston
(617) 575-2233 Shareholder Services Division
(for Eligible Institutions Only) Mail Stop 45-01-19
Confirm by Telephone 150 Royall Street
Canton, Massachusetts 02021
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at the telephone
numbers and location listed below. Shareholders may also contact their local
broker, dealer, commercial bank, trust company or nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[MacKenzie
Partners, Inc. LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(800) 881-8320
July 30, 1996
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
REEBOK INTERNATIONAL LTD.
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 30, 1996
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, AUGUST 27, 1996, UNLESS THE OFFER IS EXTENDED.
TO: THE FIRST NATIONAL BANK OF BOSTON, DEPOSITARY
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand:
(for Eligible Institutions Only)
Shareholder Services Division (617) 575-2232 BancBoston Trust Company
P.O. Box 1889 (617) 575-2233 of New York
Mail Stop 45-02-53 Confirm by Telephone: 55 Broadway, Third Floor
Boston, Massachusetts 02105 (617) 575-3400 New York, New York 10006
By Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
Mail Stop 45-02-53
150 Royall Street
Canton, Massachusetts 02021
------------------------
</TABLE>
Delivery of this instrument and all other documents to the address or
transmission of instructions to a facsimile number other than as set forth above
does not constitute a valid delivery.
PLEASE READ THE ENTIRE LETTER OR TRANSMITTAL, INCLUDING THE
ACCOMPANYING INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX BELOW.
This Letter of Transmittal is to be used only if (a) certificates for Shares
(as defined below) are to be forwarded herewith or (b) a tender of Shares is
being made concurrently by book-entry transfer to the account maintained by The
First National Bank of Boston (the "Depositary") at The Depository Trust Company
or Philadelphia Depository Trust Company (hereinafter, collectively referred to
as the "Book-Entry Transfer Facilities") pursuant to Section 3 of the Offer to
Purchase. See Instruction 2.
- --------------------------------------------------------------------------------
<TABLE>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PRE-ADDRESSED LABEL OR FILL IN TENDERED CERTIFICATES
EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH SIGNED ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER OF
CERTIFICATE NUMBER OF SHARES
NUMBER(S)* SHARES TENDERED**
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
Tendered
------------------------------------------------------------------------------------------------------------------------------
Indicate in this box order (by certificate number) in which Shares are to be
purchased in event of proration. (Attach additional list if necessary.)
*** See Instruction 10.
1st: 2nd: 3rd: 4th: 5th:
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
* DOES NOT need to be completed if Shares are tendered by book-entry
transfer.
** If you desire to tender fewer than all Shares evidenced by any
certificates listed above, please indicate in this column the number of
Shares you wish to tender. Otherwise, all Shares evidenced by such
certificates will be deemed to have been tendered. See Instruction 4.
*** If you do not designate an order, in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 2
NOTE: SIGNATURE MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Shareholders who cannot deliver the certificates for their Shares to the
Depositary prior to the Expiration Date (as defined in the Offer to Purchase (as
defined below)) or who cannot complete the procedure for book-entry transfer on
a timely basis or who cannot deliver a Letter of Transmittal and all other
required documents to the Depositary prior to the Expiration Date must, in each
case, tender their Shares pursuant to the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. See Instruction 2.
Shareholders who desire to tender Shares pursuant to the Offer (as defined
below) and who cannot deliver their certificates for their Shares (or who are
unable to comply with the procedures for book-entry transfer on a timely basis)
and all other documents required by this Letter of Transmittal to the Depositary
at or before the Expiration Date (as defined in the Offer to Purchase) may
tender their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents to
one of the Book-Entry Transfer Facilities does not constitute delivery to the
Depositary.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility:
/ / The Depository Trust Company / / Philadelphia Depository
Company
Account Number
------------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------
/ / CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------
Name of Institution that Guaranteed Delivery:
--------------------------------
Check Box of Applicable Book-Entry Transfer Facility and Give Account Number
if Delivered by Book-Entry Transfer.
/ / The Depository Trust Company / / Philadelphia Depository
Company
Account Number
------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
CONDITIONAL TENDER
(SEE INSTRUCTION 9)
/ / Check here if tender of Shares is conditional on the Company purchasing all
or a minimum number of the tendered Shares and complete the following:
Minimum number of Shares to be sold:
-----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 8)
To be completed ONLY if the Shares are being tendered by or on behalf of a
person owning beneficially or of record, as of the close of business on July 26,
1996, an aggregate of fewer than 100 Shares. The undersigned either (check one
box):
/ / was the beneficial or record owner as of the close of business on July 26,
1996, of an aggregate of fewer than 100 Shares, all of which are being
tendered; or
/ / is a broker dealer, commercial bank trust company, or other nominee that (a)
is tendering for the beneficial owner(s) thereof, Shares with respect to
which it is the record holder and (b) believes, based upon representations
made to it by such beneficial owner(s), that each such person was the
beneficial owner, as of the close of business on July 26, 1996, of an
aggregate of fewer than 100 Shares and is tendering all of such Shares.
In addition, the undersigned is tendering Shares either (check one box):
/ / at the Purchase Price (defined below), as the same shall be determined by
the Company in accordance with the terms of the Offer (persons checking this
box need not indicate the price per Share below); or
/ / at the price per Share indicated below under "Price (in Dollars) per Share
at which Shares are being tendered in this Letter of Transmittal."
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
- --------------------------------------------------------------------------------
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
TO THE FIRST NATIONAL BANK OF BOSTON:
The undersigned hereby tenders to Reebok International Ltd., a
Massachusetts corporation (the "Company"), the above described shares of the
Company's common stock, $.01 par value per share (the "Shares"), at the price
per Share indicated in this Letter of Transmittal, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Company's Offer to
Purchase, dated July 30, 1996 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which together
constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to all the Shares that are being tendered hereby and orders the registration
of all such Shares if tendered by book-entry transfer and hereby irrevocably
constitutes and appoints the Depositary as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Depositary
also acts as the agent of the Company) with respect to such Shares with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to:
(a) deliver certificate(s) for such Shares or transfer ownership of
such Shares on the account books maintained by any of the Book-Entry
Transfer Facilities, together in either such case with all accompanying
evidences of transfer and authenticity, to, or upon the order of, the
Company upon receipt by the Depositary, as the undersigned's agent, of the
aggregate Purchase Price (as defined below) with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that:
(i) the undersigned has a net long position in Shares or equivalent
securities at least equal to the Shares tendered within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended, and
(ii) such tender of Shares complies with Rule 14e-4;
(b) when and to the extent the Company accepts such Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read and agrees to all of the terms of the
Offer.
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy, and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed
above, if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates and the number of Shares that
the undersigned wishes to tender, should be set forth in the appropriate boxes
above. The price at which such Shares are being tendered should be indicated in
the box below.
The undersigned understands that the Company will, upon the terms and
subject to the conditions of the Offer, determine a single per Share price (not
in excess of $36.00 nor less than $30.00 per Share) net to the seller in cash
(the "Purchase Price") that it will pay for Shares properly tendered and not
withdrawn prior to the Expiration Date pursuant to the Offer, taking into
account the number of Shares so tendered and the prices (in multiples of $.125)
specified by tendering shareholders. The undersigned understands that the
Company will select the lowest Purchase Price that will
<PAGE> 5
allow it to buy 24,000,000 shares (or such lesser number of Shares as are
properly tendered at prices not in excess of $36.00 nor less than $30.00 per
share) pursuant to the Offer. The undersigned understands that all Shares
properly tendered at prices at or below the Purchase Price and not withdrawn
prior to the Expiration Date will be purchased at the Purchase Price, upon the
terms and subject to the conditions of the Offer, including its proration and
conditional tender provisions, and that the Company will return all other Shares
not purchased pursuant to the Offer, including Shares tendered at prices greater
than the Purchase Price and not withdrawn prior to the Expiration Date and
Shares not purchased because of proration or conditional tender.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may accept for payment fewer than all of the Shares tendered hereby. In any such
event, the undersigned understands that certificate(s) for any Shares delivered
herewith but not tendered or not purchased will be returned to the undersigned
at the address indicated above, unless otherwise indicated under the "Special
Payment Instructions" or "Special Delivery Instructions" below. The undersigned
recognizes that the Company has no obligation, pursuant to the Special Payment
Instructions, to transfer any certificate for Shares from the name of its
registered holder, or to order the registration or transfer of Shares tendered
by book-entry transfer, if the Company purchases none of the Shares represented
by such certificate or tendered by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the aggregate Purchase Price for such of the Shares tendered
hereby as are purchased will be issued to the order of the undersigned and
mailed to the address indicated above, unless otherwise indicated under the
Special Payment Instructions or the Special Delivery Instructions below.
<PAGE> 6
<TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
- --------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
(SEE INSTRUCTION 5)
- --------------------------------------------------------------------------------
<CAPTION>
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES
(Shareholders who desire to tender Shares at more than one price must
complete a separate Letter of Transmittal for each price at which Shares
are tendered.)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/ /$30.000 / /$30.625 / /$31.250 / /$31.875 / /$32.500 / /$33.125 / /$33.750 / /$34.375 / /$35.000
/ /$30.125 / /$30.750 / /$31.375 / /$32.000 / /$32.625 / /$33.250 / /$33.875 / /$34.500 / /$35.125
/ /$30.250 / /$30.875 / /$31.500 / /$32.125 / /$32.750 / /$33.375 / /$34.000 / /$34.625 / /$35.250
/ /$30.375 / /$31.000 / /$31.625 / /$32.250 / /$32.875 / /$33.500 / /$34.125 / /$34.750 / /$35.375
/ /$30.500 / /$31.125 / /$31.750 / /$32.375 / /$33.000 / /$33.625 / /$34.250 / /$34.875 / /$35.500
/ /$35.625
/ /$35.750
/ /$35.875
/ /$36.000
</TABLE>
===============================================================================
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6 , 7 AND 11)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or any check for the aggregate Purchase Price of Shares
purchased are to be issued in the name of and sent to someone other than
the undersigned.
Issue:
/ / Check to:
/ / Certificates to:
Name(s)
----------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------
-----------------------------------------------------------------
(ZIP CODE)
-----------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
===============================================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 6, 7 AND 11)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or any check for the Purchase Price of Shares purchased.
Issued in the name of the undersigned, are to be mailed to someone other
than the undersigned or to the undersigned at an address other than that
shown above.
Mail:
/ / Check to:
/ / Certificates to:
Name(s)
-----------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------
-----------------------------------------------------------------
(ZIP CODE)
================================================================================
<PAGE> 7
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL SHAREHOLDERS)
(PLEASE COMPLETE AND RETURN THE ENCLOSED FORM W-9)
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted with
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or another
person acting in a fiduciary or representative capacity, please set forth full
title and see Instruction 6.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated: , 1996
-----------
Name(s):
-----------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number(s):
-------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 6)
Name of Firm:
-------------------------------------------------------------------
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Dated: , 1996
--------
- --------------------------------------------------------------------------------
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of
the Shares (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of such Shares) exactly as the name
of the registered holder appears on the certificate tendered with this
Letter of Transmittal and payment and delivery are to be made directly to
such owner unless such owner has completed either the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company (not a savings bank or savings and loan association) having an
office, branch or agency in the United States (each such entity, an
"Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal. See Instruction 6.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates for
Shares are delivered with it to the Depositary (or such certificates will be
delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or if a tender for Shares is being made concurrently pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Certificates for all physically tendered Shares or confirmation of
a book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of Shares tendered electronically, together in each case with a
properly completed and duly executed Letter of Transmittal or duly executed and
manually signed facsimile of it, and any other documents required by this Letter
of Transmittal, should be mailed or delivered to the Depositary at the
appropriate address set forth herein and must be delivered to the Depositary on
or before the Expiration Date (as defined in the Offer to Purchase). DELIVERY OF
DOCUMENTS TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Shareholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary before the Expiration Date, or whose Shares cannot be delivered on a
timely basis pursuant to the procedures for book-entry transfer, must, in any
such case, tender their Shares by or through any Eligible Institution by
properly completing and duly executing and delivering a Notice of Guaranteed
Delivery (or facsimile of it) and by otherwise complying with the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to
such procedure, certificates for all physically tendered Shares or book-entry
confirmations, as the case may be, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile of it) and all other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange trading days after receipt by the
Depositary of such Notice of Guaranteed Delivery, all as provided in Section 3
of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be tendered validly pursuant to the guaranteed delivery
procedure, the Depositary must receive the Notice of Guaranteed Delivery on or
before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF TITLE TENDERING SHAREHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders, nor will it purchase any fractional Shares, except as expressly
provided in the Offer to Purchase. All tendering shareholders, by execution of
this Letter of Transmittal (or a facsimile of it), waive any right to receive
any notice of the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" is inadequate, the certificate numbers and/or
the number of Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares that are to be
tendered in the column entitled "Number of Shares Tendered," in the box
captioned "Description of Shares Tendered." In such case, if any tendered Shares
are purchased, a new certificate for the remainder of the Shares (including any
Shares not purchased) evidenced by the old certificate(s) will be issued and
sent to the registered holder(s), unless otherwise specified in either the
"Special Payment Instructions" or "Special Delivery Instructions" box on this
Letter of
<PAGE> 9
Transmittal, as soon as practicable after the Expiration Date. Unless otherwise
indicated, all Shares represented by the certificate(s) listed and delivered to
the Depositary will be deemed to have been tendered.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be
properly tendered, the shareholder MUST check the box indicating the price per
Share at which he or she is tendering Shares under "Price (In Dollars) Per Share
at Which Shares Are Being Tendered" on this Letter of Transmittal. ONLY ONE BOX
MAY BE CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE
IS NO PROPER TENDER OF SHARES. A shareholder wishing to tender portions of his
or her Share holdings at different prices must complete a separate Letter of
Transmittal for each price at which he or she wishes to tender each such portion
of his or her Shares. The same Shares cannot be tendered (unless previously
properly withdrawn as provided in Section 4 of the Offer to Purchase) at more
than one price.
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the certificate(s)
without any change whatsoever.
(b) If the Shares are registered in the names of two or more joint
holders, each such holder must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of
certificate(s) representing such Shares or separate stock power(s) are
required unless payment is to be made or the certificate(s) for Shares not
tendered or not purchased are to be issued to a person other than the
registered holder(s). SIGNATURE(S) ON SUCH CERTIFICATE(S) MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION. If this Letter of Transmittal is
signed by a person other than the registered holder(s) of the
certificate(s) listed, or if payment is to be made or their certificate(s)
for Shares not tendered or not purchased are to be issued to a person other
than the registered holder(s), the certificate(s) must be endorsed or
accompanied by appropriate stock power(s), in either case signed exactly as
the name(s) of the registered holder(s) appears on the certificate(s), and
the signature(s) on such certificate(s) or stock power(s) must be
guaranteed by an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock
power(s) are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing
and must submit proper evidence satisfactory to the Company of their
authority so to act.
7. STOCK TRANSFER TAXES. Except as provided in this Instruction 7, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter of
Transmittal. The Company will pay or cause to be paid any stock transfer taxes
payable on the transfer to it of Shares purchased pursuant to the Offer. If,
however:
(a) payment of the aggregate Purchase Price for Shares tendered hereby
and accepted for purchase is to be made to any person other than the
registered holder(s);
(b) Shares not tendered or not accepted for purchase are to be
registered in the name(s) of any person(s) other than the registered
holder(s); or
(c) tendered certificates are registered in the name(s) of any
person(s) other than the person(s) signing this Letter of Transmittal;
then the Depositary will deduct from such aggregate Purchase Price the amount of
any stock transfer taxes (whether imposed on the registered holder, such other
person or otherwise) payable on account of the transfer to such person, unless
satisfactory evidence of the payment of such taxes or any exemption from them is
submitted.
8. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the
Company is to purchase fewer than all Shares tendered before the Expiration Date
and not withdrawn, the Shares purchased first will consist of all Shares
tendered by any shareholder who owned of record or owned beneficially, as of the
close of business on July 26, 1996, an aggregate of fewer than 100 Shares, and
who tenders all of his or her Shares at or below the Purchase Price (an "Odd Lot
Holder"). This preference will not be available unless the box captioned "Odd
Lots" is completed.
9. CONDITIONAL TENDERS. As described in Sections 1 and 6 of the Offer to
Purchase, shareholders may condition their tenders on all or a minimum number of
their tendered Shares being purchased ("Conditional Tenders"). If the Company is
to purchase less than all Shares tendered before the Expiration Date and not
withdrawn, the Depositary will perform a
<PAGE> 10
preliminary proration, and any Shares tendered at or below the Purchase Price
pursuant to a Conditional Tender for which the condition was not satisfied shall
be deemed withdrawn, subject to reinstatement if such Conditionally Tendered
Shares are subsequently selected by random lot for purchase subject to Sections
1 and 6 of the Offer to Purchase. Conditional tenders will be selected by lot
only from shareholders who tender all of their Shares. All tendered Shares shall
be deemed unconditionally tendered unless the "Conditional Tender" box is
completed. The Conditional Tender alternative is made available so that a
shareholder may assure that the purchase of Shares from the shareholder pursuant
to the Offer will be treated as a sale of such Shares by the shareholder, rather
than the payment of a dividend to the shareholder, for federal income tax
purposes. Odd Lot Shares, which will not be subject to proration, cannot be
conditionally tendered. It is the tendering shareholder's responsibility to
calculate the minimum number of Shares that must be purchased from the
shareholder in order for the shareholder to qualify for sale (rather than
dividend) treatment, and each shareholder is urged to consult his or her own tax
advisor.
IN THE EVENT OF PRORATION, ANY SHARES TENDERED PURSUANT TO A CONDITIONAL
TENDER FOR WHICH THE MINIMUM REQUIREMENTS ARE NOT SATISFIED MAY NOT BE ACCEPTED
AND THEREBY DEEMED WITHDRAWN.
10. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of
the Offer to Purchase, shareholders may designate the order in which their
Shares are to be purchased in the event of proration. The order of purchase may
have an effect on the federal income tax treatment of the Purchase Price for the
Shares purchased. See Sections 1 and 14 of the Offer to Purchase.
11. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares
not tendered or not purchased and/or check(s) are to be issued in the name of a
person other than the signer of the Letter of Transmittal or if such
certificates and/or checks are to be sent to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1.
12. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company in its sole discretion, which determinations
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders of Shares it determines not to be in proper
form or the acceptance of which or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares, and the Company's interpretation of the terms
of the Offer (including these instructions) will be final and binding on all
parties. No tender of Shares will be deemed to be properly made until all
defects and irregularities have been cured or waived. Unless waived, any defects
or irregularities in connection with tenders must be cured within such time as
the Company shall determine. None of the Company, the Dealer Manager (as defined
in the Offer to Purchase), the Depositary, the Information Agent (as defined in
the Offer to Purchase) or any other person is or will be obligated to give
notice of any defects or irregularities in tenders and none of them will incur
any liability for failure to give any such notice.
13. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent or the Dealer Manager at
their addresses and telephone numbers set forth at the end of this Letter of
Transmittal or from your broker, dealer, commercial bank or trust company.
14. FORM W-9 AND FORM W-8. Under the federal income tax backup withholding
rules, unless an exemption applies under the applicable law and regulations, 31%
of the gross proceeds payable to a shareholder or other payee pursuant to the
Offer must be withheld and remitted to the United States Treasury, unless the
shareholder or other payee provides his or her taxpayer identification number
(employer identification number or social security number) to the Depositary and
certifies that such number is correct. Therefore, each tendering shareholder
should complete and sign the Substitute Form W-9 included as part of the Letter
of Transmittal so as to provide the information and certification necessary to
avoid backup withholding, unless such shareholder otherwise establishes to the
satisfaction of the Depositary that it is not subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign shareholders (in addition to foreign corporations)) are not subject to
these backup withholding and reporting requirements. In order for a foreign
shareholder to qualify as an exempt recipient, that shareholder must submit an
IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury,
attesting to that shareholder's exempt status. Such statements can be obtained
from the Depositary.
15. WITHHOLDING ON FOREIGN SHAREHOLDERS. Even if a foreign shareholder has
provided the required certification to avoid backup withholding, the Depositary
will withhold federal income taxes equal to 30% of the gross payments payable to
a foreign shareholder or his agent unless the Depositary determines that an
exemption from or a reduced rate of
<PAGE> 11
withholding is available pursuant to a tax treaty or that an exemption from
withholding is applicable because such gross proceeds are effectively connected
with the conduct of a trade or business in the United States. For this purpose,
a foreign shareholder is a shareholder that is not (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, any State or any political
subdivision thereof or (iii) any estate or trust the income of which is subject
to United States federal income taxation regardless of the source of such
income. In order to obtain a reduced rate of withholding pursuant to a tax
treaty, a foreign shareholder must deliver to the Depositary a properly
completed Form 1001. In order to obtain an exemption from withholding on the
grounds that the gross proceeds paid pursuant to the Offer are effectively
connected with the conduct of a trade or business within the United States, a
foreign shareholder must deliver to the Depositary a properly completed Form
4224. The Depositary will determine a shareholder's status as a foreign
shareholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to outstanding certificates or statements concerning
eligibility for a reduced rate of, or exemption from, withholding (e.g., Form
1001 or Form 4224) unless facts and circumstances indicate that such reliance is
not warranted. A foreign shareholder may be eligible to obtain a refund of all
or a portion of any tax withheld if such shareholder meets the "complete
redemption", "substantially disproportionate" or "not essentially equivalent to
a dividend" test described in Section 14 of the Offer to Purchase or is
otherwise able to establish that no tax or a reduced amount of tax is due.
Backup withholding generally will not apply to amounts subject to the 30% or
treaty-reduced rate of withholding. Foreign shareholders are urged to consult
their tax advisors regarding the application of federal income tax withholding,
including eligibility for a withholding tax reduction or exemption and refund
procedures.
<PAGE> 12
<TABLE>
PAYER'S NAME: THE FIRST NATIONAL BANK OF BOSTON
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1: PLEASE PROVIDE YOUR TIN IN
THE BOX AT RIGHT AND CERTIFY BY SIGNING -------------------------------------------
FORM W-9 AND DATING BELOW Social Security Number
OR
PAYER'S REQUEST FOR TAXPAYER Employer Identification Number
IDENTIFICATION NUMBER (TIN)
---------------------------------------------------------------------------------------
PART 2: For Payees exempt from backup withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 and
complete as instructed therein.
---------------------------------------------------------------------------------------
PART 3/ Awaiting TIN / /
---------------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that (1) the number shown
on this form is my correct Taxpayer Identification Number (or I am waiting for a
number to be issued to me) and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate IRS
center or Social Security Administration office or (b) I intend to mail or deliver
an application in the near future) and (2) I am not subject to backup withholding
because: (a) I am exempt from backup withholding; or (b) I have not been notified
by the IRS that I am subject to backup withholding as a result of a failure to
report all interest or dividends; or (c) the IRS has notified me that I am no
longer subject to backup withholding. Certification instructions--You must cross
out Item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because of underreporting interest or dividends on
your tax return.
SIGN SIGNATURE
[ART] ---------------------------------------------------------------------------
HERE DATE
---------------------------------------------------------------------------------
NAME
---------------------------------------------------------------------------------
(Please Print)
ADDRESS
-----------------------------------------------------------------------------
-------------------------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(800) 881-8320
IMPORTANT: This Letter of Transmittal or a facsimile hereof (together with
certificates for the Shares being tendered and all other required documents), or
a Notice of Guaranteed Delivery must be received prior to 5:00 p.m., New York
City time, on the Expiration Date. SHAREHOLDERS ARE ENCOURAGED TO RETURN A
COMPLETED FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
<PAGE> 1
REEBOK INTERNATIONAL LTD.
NOTICE OF GUARANTEED DELIVERY OF SHARES OF COMMON STOCK
This form or a facsimile hereof must be used to accept the Offer (as
defined below) if:
(a) certificates for shares of common stock, $.01 par value per share (the
"Shares"), of Reebok International Ltd., a Massachusetts corporation (the
"Company"), cannot be delivered to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Company's Offer to Purchase dated July 30, 1996
(the "Offer to Purchase")); or
(b) the procedure for book-entry transfer (set forth in Section 3 of the
Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal (or a facsimile thereof) and all other
required documents cannot be delivered to the Depositary prior to the Expiration
Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
<TABLE>
TO: THE FIRST NATIONAL BANK OF BOSTON, DEPOSITARY
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand:
(for Eligible Institutions Only)
Shareholder Services Division (617) 575-2232 BancBoston Trust Company
P.O. Box 1889 (617) 575-2233 of New York
Mail Stop 45-02-53 Confirm by Telephone: 55 Broadway, Third Floor
Boston, Massachusetts 02105 (617) 575-3400 New York, New York 10006
</TABLE>
By Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
Mail Stop 45-02-53
150 Royall Street
Canton, Massachusetts 02021
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company at the price per Share
indicated in this Notice of Guaranteed Delivery, upon the terms and subject to
the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of both of which is
hereby acknowledged, Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
- --------------------------------------------------------------------------------
CONDITIONAL TENDER
(SEE INSTRUCTION 9)
/ / check here if tender of Shares is conditional on the Company purchasing all
or a minimum number of the tendered Shares and complete the following:
Minimum number of Shares to be sold: _______________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ODD LOTS
To be completed ONLY if the Shares are being tendered by or on behalf
of a person owning beneficially or of record, as of the close of business
on July 26, 1996, an aggregate of fewer than 100 Shares. The undersigned
either (check one box):
/ / was the beneficial or record owner, as of the close of business on
July 26, 1996, of an aggregate of fewer than 100 Shares, all of which
are being tendered; or
/ / is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial owner, as of the close of business on July
26, 1996, of an aggregate of fewer than 100 Shares and is tendering
all of such Shares.
In addition, the undersigned is tendering Shares either (check one box):
/ / at the Purchase Price, as the same shall be determined by the Company
in accordance with the terms of the Offer (persons checking this box
need not indicate the price per Share below); or
/ / at the price per Share indicated below under "Price (in Dollars) per
Share at which Shares are being tendered."
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
- --------------------------------------------------------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES
(SHAREHOLDERS WHO DESIRE TO TENDER SHARES AT MORE THAN ONE PRICE MUST
COMPLETE A SEPARATE NOTICE OF GUARANTEE FOR EACH PRICE AT WHICH SHARES ARE
TENDERED.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/ /$30.000 / /$30.625 / /$31.250 / /$31.875 / /$32.500 / /$33.125 / /$33.750 / /$34.375 / /$35.000
/ /$30.125 / /$30.750 / /$31.375 / /$32.000 / /$32.625 / /$33.250 / /$33.875 / /$34.500 / /$35.125
/ /$30.250 / /$30.875 / /$31.500 / /$32.125 / /$32.750 / /$33.375 / /$34.000 / /$34.625 / /$35.250
/ /$30.375 / /$31.000 / /$31.625 / /$32.250 / /$32.875 / /$33.500 / /$34.125 / /$34.750 / /$35.375
/ /$30.500 / /$31.125 / /$31.750 / /$32.375 / /$33.000 / /$33.625 / /$34.250 / /$34.875 / /$35.500
<S> <C>
/ /$30.000 / /$35.625
/ /$30.125 / /$35.750
/ /$30.250 / /$35.875
/ /$30.375 / /$36.000
/ /$30.500
</TABLE>
- --------------------------------------------------------------------------------
============================================================
- ---------------------------------------------------------
(Please type or print)
Certificate Nos. (if available):
-------------------------------------------------------
-------------------------------------------------------
Name(s)
-------------------------------------------------------
Address(es)
-------------------------------------------------------
-------------------------------------------------------
Area Code(s) and Telephone Number(s)
==========================================================
-------------------------------------------------------
SIGN HERE
-------------------------------------------------------
Signature(s)
-------------------------------------------------------
Dated:
If Shares will be tendered by book-entry transfer, check one box:
/ / The Depository Trust Company
/ / Philadelphia Depository Company
Account
Number:
-----------------------------------------------------
============================================================
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned is a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch, or agency in the
United States and represents that: (a) the above-named person(s) "own(s)" the
Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended, and (b) such tender of Shares
complies with such Rule 14e-4, and guarantees that the Depositary will receive
(i) certificates of the Shares tendered hereby in proper form for transfer, or
(ii) confirmation that the Shares tendered hereby have been delivered pursuant
to the procedure for book-entry transfer (set forth in Section 3 of the Offer to
Purchase) into the Depositary's account at The Depository Trust Company or
Philadelphia Depository Company, as the case may be, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and any
other documents required by the Letter of Transmittal, all within three New York
Stock Exchange trading days after the date the Depositary receives this Notice
of Guaranteed Delivery.
============================================================
Authorized Signature:
Name:
-----------------------------------------------
(PLEASE PRINT)
- -----------------------------------------------------
- -----------------------------------------------------
Title:
----------------------------------------------
Name of Firm:
---------------------------------------
============================================================
============================================================
Address:
---------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone Number:
---------------------
- -----------------------------------------------------
Date:--------------------------, 1996
============================================================
DO NOT SEND CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST
BE SENT WITH THE LETTER OF TRANSMITTAL.
<PAGE> 1
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
REEBOK INTERNATIONAL LTD.
Offer To Purchase For Cash Up To
24,000,000 Shares Of Its Common Stock
At A Purchase Price Not In Excess Of $36.00
Nor Less Than $30.00 Per Share
- -------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, AUGUST 27, 1996, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Reebok International Ltd., a Massachusetts corporation (the "Company"), has
appointed us to act as Dealer Manager in connection with its offer to purchase
for cash 24,000,000 shares (or such lesser number of shares as are properly
tendered) of its Common Stock, $.01 par value per share (the "Shares"), at
prices not in excess of $36.00 nor less than $30.00 per Share, specified by its
shareholders, upon the terms and subject to the conditions set forth in its
Offer to Purchase, dated July 30, 1996, and in the related Letter of Transmittal
(which together constitute the "Offer").
The Company will determine the single per Share price, not in excess of
$36.00 nor less than $30.00 per Share, net to the seller in cash (the "Purchase
Price"), that it will pay for Shares properly tendered pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will allow it to buy 24,000,000 Shares (or such lesser number of Shares as are
properly tendered). All Shares acquired in the Offer will be acquired at the
Purchase Price. All Shares properly tendered at prices at or below the Purchase
Price and not withdrawn will be purchased at the Purchase Price, upon the terms
and subject to the conditions of the Offer, including the proration and
conditional tender provisions. Shares tendered at prices in excess of the
Purchase Price and Shares not purchased because of proration will be returned.
The Company reserves the right, in its sole discretion, to purchase more than
24,000,000 Shares pursuant to the Offer. See Sections 1 and 15 of the Offer to
Purchase.
If, prior to the Expiration Date (as defined in the Offer to Purchase),
more than 24,000,000 Shares (or such greater number of Shares as the Company may
elect to purchase) are properly tendered and not withdrawn, the Company will,
upon the terms and subject to the conditions of the Offer, accept Shares for
purchase first from Odd Lot Holders (as defined in the Offer to Purchase) who
properly tender their Shares at or below the Purchase Price and then on a pro
rata basis from all other shareholders whose Shares are properly tendered at or
below the Purchase Price and not withdrawn. If any shareholder tenders Shares
and does not wish to have such Shares purchased subject to proration, such
shareholder may tender Shares subject to the condition that a specified minimum
number of Shares (which may be represented by designated stock certificates) or
none of such Shares be purchased. See Sections 1, 3 and 6 of the Offer to
Purchase.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 7 OF THE OFFER TO PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase, dated July 30, 1996;
2. Letter to Clients which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer;
3. Letter, dated July 30, 1996, from Paul Fireman, Chairman of the
Board and Chief Executive Officer of the Company, to shareholders of the
Company;
<PAGE> 2
4. Letter of Transmittal for your use and for the information of your
clients (together with accompanying Form W-9); and
5. Notice of Guaranteed Delivery to be used to accept the Offer if the
Share certificates and all other required documents cannot be delivered to
the Depositary by the Expiration Date or if the procedure for book-entry
transfer cannot be completed on a timely basis.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON TUESDAY, AUGUST 27, 1996, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or any person
for soliciting tenders of Shares pursuant to the Offer other than fees paid to
the Dealer Manager, the Information Agent or the Depositary as described in the
Offer to Purchase. The Company will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to the beneficial owners of Shares held by you as a nominee
or in a fiduciary capacity. The Company will pay or cause to be paid any stock
transfer taxes applicable to its purchase of Shares, except as otherwise
provided in Instruction 7 of the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be sent
to the Depositary with either certificate(s) representing the tendered Shares or
confirmation of their book-entry transfer all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
As described in Section 3, "The Offer -- Procedure for Tendering Shares,"
of the Offer to Purchase, tenders may be made without the concurrent deposit of
stock certificates or concurrent compliance with the procedure for book-entry
transfer, if such tenders are made by or through a broker or dealer which is a
member firm of a registered national securities exchange, or a member of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office, branch or agency in the United States. Certificates
for Shares so tendered (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the "Book-Entry Transfer
Facilities" described in the Offer to Purchase), together with a properly
completed and duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal, must be received by the Depositary within
three New York Stock Exchange trading days after timely receipt by the
Depositary of a properly completed and duly executed Notice of Guaranteed
Delivery.
Any inquiries you may have with respect to the Offer should be addressed to
CS First Boston Corporation or to the Information Agent at their respective
addresses and telephone numbers set forth on the back cover page of the Offer to
Purchase.
Additional copies of the enclosed material may be obtained from the
undersigned, telephone: (800) 881-8320 (toll free) or from the Information
Agent, MacKenzie Partners, Inc., telephone: (800) 322-2885.
Very truly yours,
CS FIRST BOSTON CORPORATION
Enclosures
- -------------------------------------------------------------------------------
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY OF ITS AFFILIATES, THE DEALER
MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
- -------------------------------------------------------------------------------
<PAGE> 1
REEBOK INTERNATIONAL LTD.
Offer To Purchase For Cash Up To
24,000,000 Shares Of Its Common Stock
At A Purchase Price Not In Excess Of $36.00
Nor Less Than $30.00 Per Share
- -------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON TUESDAY, AUGUST 27, 1996, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated July 30,
1996, and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by Reebok International Ltd., a
Massachusetts corporation (the "Company"), to purchase 24,000,000 shares (or
such lesser numbered shares as are properly tendered) of its Common Stock, $.01
par value per share (the "Shares"), at prices not in excess of $36.00 nor less
than $30.00 per Share, specified by tendering shareholders, upon the terms and
subject to the conditions set forth in the Offer.
The Company will determine the single per Share price, not in excess of
$36.00 nor less than $30.00 per Share, net to the seller in cash (the "Purchase
Price"), that it will pay for Shares properly tendered pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the lowest Purchase Price that
will allow it to buy 24,000,000 Shares (or such lesser number of Shares as are
properly tendered). All Shares acquired in the Offer will be acquired at the
Purchase Price. All Shares properly tendered at prices at or below the Purchase
Price and not withdrawn will be purchased at the Purchase Price, upon the terms
and subject to the conditions of the Offer, including the proration and
conditional tender provisions. Shares tendered at prices in excess of the
Purchase Price and Shares not purchased because of proration will be returned.
The Company reserves the right, in its sole discretion, to purchase more than
24,000,000 Shares pursuant to the Offer. See Sections 1 and 15 of the Offer to
Purchase.
If, prior to the Expiration Date (as defined in the Offer to Purchase),
more than 24,000,000 Shares (or such greater number of Shares as the Company may
elect to purchase) are properly tendered and not withdrawn, the Company will,
upon the terms and subject to the conditions of the Offer, accept Shares for
purchase first from Odd Lot Holders (as defined in the Offer to Purchase) who
properly tender their Shares at or below the Purchase Price and then on a pro
rata basis from all other shareholders whose Shares are properly tendered at or
below the Purchase Price and not withdrawn. If any shareholder tenders Shares
and does not wish to have such Shares purchased subject to proration, such
shareholder may tender Shares subject to the condition that a specified minimum
number of Shares (which may be represented by designated stock certificates) or
none of such Shares be purchased. See Sections 1, 3 and 6 of the Offer to
Purchase.
We are the owner of record of Shares held for your account. As such, we are
the only ones who can tender your Shares, and then only pursuant to your
instructions. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION
ONLY; YOU CANNOT USE IT TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT.
<PAGE> 2
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. You may tender Shares at prices not in excess of $36.00 nor less
than $30.00 per Share as indicated in the attached Instruction Form, net to
you in cash.
2. You may condition your tender of Shares on the Company purchasing
all or a minimum number of your Shares.
3. You may designate the priority in which your Shares shall be
purchased in the event of proration.
4. The Offer is not conditioned upon any minimum number of Shares
being tendered.
5. The Offer, proration period and withdrawal rights will expire at
5:00 P.M., New York City time, on Tuesday, August 27 1996, unless the
Company extends the Offer.
6. The Offer is for 24,000,000 Shares, constituting approximately
33.1% of the Shares outstanding as of July 26, 1996.
7. Tendering shareholders will not be obligated to pay any brokerage
commissions, solicitation fees, or, subject to Instruction 7 of the Letter
of Transmittal, stock transfer taxes on the Company's purchase of Shares
pursuant to the Offer.
8. If you beneficially held, as of the close of business on July 26,
1996, an aggregate of fewer than 100 Shares, and you instruct us to tender
on your behalf all such Shares at or below the Purchase Price before the
Expiration Date (as defined in the Offer to Purchase) and check the box
captioned "Odd Lots" in the attached Instruction Form, the Company, upon
the terms and subject to the conditions of the Offer, will accept all such
Shares for purchase before proration, if any, of the purchase of other
Shares properly tendered at or below the Purchase Price.
9. If you wish to tender portions of your Shares at different prices,
you must complete a separate Instruction Form for each price at which you
wish to tender each such portion of your Shares. We must submit separate
Letters of Transmittal on your behalf for each price you will accept.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is enclosed.
If you authorize us to tender your Shares, we will tender all such Shares unless
you specify otherwise on the attached Instruction Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE OFFER.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON TUESDAY, AUGUST 27, 1996, UNLESS THE COMPANY EXTENDS THE OFFER.
As described in Section 1 of the Offer to Purchase, if more than
24,000,000 Shares have been properly tendered at prices at or below the
Purchase Price and not withdrawn prior to the Expiration Date (as defined
in the Offer to Purchase), the Company will purchase properly tendered
Shares on the basis set forth below:
(a) first, all Shares properly tendered and not withdrawn prior to the
Expiration Date by any Odd Lot Holder (as defined below) who:
(1) tenders all Shares beneficially owned by such Odd Lot Holder at
a price at or below the Purchase Price (tenders of less than all Shares
owned by such shareholder will not qualify for this preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and if applicable on the Notice of Guaranteed Delivery; and
(b) second, after purchase of all of the foregoing Shares, all Shares
conditionally tendered in accordance with Section 6 of the Offer to
Purchase, for which the condition was satisfied, and all other Shares
tendered properly and unconditionally at prices at or below the Purchase
Price and not withdrawn prior to the Expiration Date on a pro rata basis
(with appropriate adjustments to avoid purchases of fractional Shares) as
described in the Section 1 of the Offer to Purchase; and
(c) third, if necessary, Shares conditionally tendered, for which the
condition was not satisfied at or below the Purchase Price and not
withdrawn prior to the Expiration Date, selected by random lot in
accordance with Section 6 of the Offer to Purchase.
<PAGE> 3
You may condition your tender on the Company purchasing a minimum number of
your tendered Shares. In such case, if as a result of the preliminary proration
provisions in the Offer to Purchase the Company would purchase less than such
minimum number of your Shares, then the Company will not purchase any of your
Shares, except as provided in the next sentence. In such case, if as a result of
conditionally tendered Shares not being purchased the total number of Shares
that would have been purchased is less than 24,000,000, the Company will select,
by random lot, for purchase from shareholders who conditionally tendered Shares
for which the condition, based on a preliminary proration, has not been
satisfied. See Section 1 of the Offer to Purchase.
The Offer is being made to all holders of Shares. The Company is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Company becomes aware
of any valid state statute prohibiting the making of the Offer, the Company will
make a good faith effort to comply with such statute. If, after such good faith
effort, the Company cannot comply with such statute, the Offer will not be made
to, nor will tenders be accepted from or on behalf of, holders of Shares in such
state. In those jurisdictions whose securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Company by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
INSTRUCTION FORM
INSTRUCTIONS FOR TENDER OF SHARES OF REEBOK INTERNATIONAL LTD.
Please tender to Reebok International Ltd. (the "Company"), on (our) (my)
behalf, the number of Shares indicated below, which are beneficially owned by
(us) (me) and registered in your name, upon terms and subject to the conditions
contained in the Offer to Purchase of the Company dated July 30, 1996, and the
related Letter of Transmittal, the receipt of both of which is acknowledged.
- --------------------------------------------------------------------------------
Number of Shares to be tendered: ________ Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONDITIONAL TENDER
/ / check here if tender of Shares is conditional on the Company purchasing all
or a minimum number of the tendered Shares and complete the following:
(M)inimum number of Shares to be sold: ________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 8)
/ / By checking this box the undersigned represents that the undersigned owned,
beneficially or of record, as of the close of business on July 26, 1996, an
aggregate of fewer than 100 Shares and is tendering all of such Shares.
In addition, the undersigned is tendering Shares either (check one box):
/ / at the Purchase Price, as the same shall be determined by the Company
in accordance with the terms of the Offer (persons checking this box
need not indicate the price per Share below); or
/ / at the price per Share indicated below under "Price (in Dollars) per
Share at which Shares are being tendered."
ODD LOT SHARES CANNOT BE CONDITIONALLY TENDERED
- --------------------------------------------------------------------------------
<PAGE> 4
- --------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
- --------------------------------------------------------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES
<TABLE>
(SHAREHOLDERS WHO DESIRE TO TENDER SHARES AT MORE THAN ONE PRICE MUST
COMPLETE A SEPARATE INSTRUCTION FORM FOR EACH PRICE AT WHICH SHARES ARE
TENDERED.)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
/ /$30.000 / /$30.625 / /$31.250 / /$31.875 / /$32.500 / /$33.125 / /$33.750 / /$34.375 / /$35.000
/ /$30.125 / /$30.750 / /$31.375 / /$32.000 / /$32.625 / /$33.250 / /$33.875 / /$34.500 / /$35.125
/ /$30.250 / /$30.875 / /$31.500 / /$32.125 / /$32.750 / /$33.375 / /$34.000 / /$34.625 / /$35.250
/ /$30.375 / /$31.000 / /$31.625 / /$32.250 / /$32.875 / /$33.500 / /$34.125 / /$34.750 / /$35.375
/ /$30.500 / /$31.125 / /$31.750 / /$32.375 / /$33.000 / /$33.625 / /$34.250 / /$34.875 / /$35.500
<S> <C>
/ /$30.000 / /$35.625
/ /$30.125 / /$35.750
/ /$30.250 / /$35.875
/ /$30.375 / /$36.000
/ /$30.500
- --------------------------------------------------------------------------------
</TABLE>
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF THE
TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES AND AT WHAT PRICE OR PRICES SHARES SHOULD BE TENDERED.
- ------------------------------------------------------------
Signature(s):
------------------------------------------
--------------------------------------------------------
Name(s):
------------------------------------------------
--------------------------------------------------------
(PLEASE PRINT)
--------------------------------------------------------
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
============================================================
============================================================
Address:
-----------------------------------------------
- ----------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone Number:
------------------------
Date:----------------------, 1996
============================================================
<PAGE> 1
REEBOK INTERNATIONAL LTD.
ANNOUNCES DUTCH AUCTION SELF-TENDER
FOR 24,000,000 SHARES
Stoughton, MA., July 29, 1966 -- Reebok International Ltd. (NYSE: RBK)
announced today that its Board of Directors has authorized the purchase by the
Company of 24,000,000 shares of the Company's Common Stock pursuant to a "Dutch
Auction" self-tender offer. The tender offer price range will be from $30.00 to
$36.00 net per share in cash. The offer is expected to commence tomorrow, July
30, 1996 and will expire at 5:00 p.m., New York City time, on Tuesday, August
27, 1996, unless extended. On July 26, 1996, Reebok shares closed at $31.25.
The tender offer will be subject to various terms and conditions described
in offering materials to be distributed to shareholders later this week. Under
the terms of the Dutch Auction offer, Reebok shareholders will be given the
opportunity to specify prices within the Company's stated price range at which
they are willing to tender their shares. Upon receipt of the tenders, Reebok
will determine a final price that enables it to purchase up to the stated amount
of shares from those shareholders who agreed to sell at or below the selected
purchase price. All shares purchased will be at that determined price. If more
than 24,000,000 shares are tendered at or below the purchase price, there will
be a proration. The tender offer will not be contingent upon any minimum number
of shares being tendered. Reebok currently has approximately 72,500,000 common
shares outstanding. The Company indicated it had obtained an underwritten
commitment of senior bank financing from Credit Suisse to purchase the shares as
well as a facility to finance its working capital needs.
Neither the Company nor its Board of Directors makes any recommendation to
shareholders as to whether to tender or refrain from tendering their shares.
Each shareholder must make the decision whether to tender shares and, if so, how
many shares and at what price or prices shares should be tendered. The Company
has been advised that Paul and Phyllis Fireman, who together own approximately
14.1% of the outstanding Common Stock of the Company, do not intend to tender
shares pursuant to the Offer.
"Over the past several years, we have been engaged in an active share
repurchase program as an indication of our confidence in Reebok's prospects and
our long-term commitment to increase shareholder value," said Paul Fireman,
Chairman and Chief Executive Officer of Reebok. "This Dutch Auction is an
acceleration of this strategy, which we believe is the best investment
opportunity available to Reebok at this time."
CS First Boston has been retained as the Company's financial advisor and
will serve as the Dealer Manager for the Offer. Boston Equiserve will be the
Depositary for the offer, and MacKenzie Partners, Inc. of New York will serve as
the Information Agent.
Reebok International Ltd., headquartered in Stoughton, MA, is a leading
worldwide designer, marketer and distributor of sports, fitness and casual
footwear, apparel and equipment. Principal operating units include the Reebok
Division and the Rockport Company, Inc. Sales for 1995 were approximately $3.5
billion.
<PAGE> 1
- --------------------------------------------------------------------------------
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE AND THE
RELATED LETTER OF TRANSMITTAL WHICH ARE BEING MAILED TO SHAREHOLDERS OF
REEBOK INTERNATIONAL LTD. ON OR ABOUT JULY 30, 1996. WHILE THE OFFER IS
BEING MADE TO ALL SHAREHOLDERS OF THE COMPANY, TENDERS WILL NOT BE
ACCEPTED FROM OR ON BEHALF OF THE SHAREHOLDERS IN ANY JURISDICTION IN
WHICH THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION. IN THOSE JURISDICTIONS WHOSE LAWS
REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE COMPANY BY CS
FIRST BOSTON CORPORATION ("CS FIRST BOSTON"), OR ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF
SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
REEBOK INTERNATIONAL LTD.
UP TO 24,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT IN EXCESS OF
$36.00 NOR LESS THAN $30.00 PER SHARE
Reebok International Ltd., a Massachusetts corporation (the "Company"),
invites shareholders to tender 24,000,000 shares (or such lesser number of
shares as are properly tendered) of its Common Stock, $.01 par value per share
(the "Shares"), at prices not in excess of $36.00 nor less than $30.00 per Share
in cash, as specified by such shareholders, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated July 30, 1996 and in the
related Letter of Transmittal (which together constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON TUESDAY, AUGUST 27, 1996, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is not conditioned on any minimum number of Shares being
tendered, but is subject to certain other conditions set forth in the Offer to
Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
SHAREHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH SHAREHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES AND AT WHAT PRICE OR PRICES SHARES SHOULD BE TENDERED. THE COMPANY
HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO
TENDER ANY SHARES PURSUANT TO THE OFFER.
As promptly as practicable following the Expiration Date (as defined
below), the Company will purchase 24,000,000 Shares or such lesser number of
Shares as are properly tendered (and not withdrawn in accordance with Section 4
of the Offer to Purchase) prior to the Expiration Date at prices not in excess
of $36.00 nor less than $30.00 net per Share in cash. The term "Expiration Date"
means 5:00 P.M., New York City time, on Tuesday, August 27, 1996, unless and
until the Company, in its sole discretion, shall have extended the period of
time during which the Offer will remain open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the Offer, as
so extended by the Company, shall expire.
The Company will select the lowest purchase price (the "Purchase Price")
that will allow it to buy 24,000,000 Shares (or such lesser number of Shares as
are properly tendered and not withdrawn at prices not in excess of $36.00 nor
less than $30.00 per Share). All Shares properly tendered at prices at or below
the Purchase Price and not withdrawn will be purchased at the Purchase Price,
subject to the terms and the conditions of the Offer, including the proration
and conditional tender provisions. For purposes of the Offer, the Company will
be deemed to have accepted for payment (and thereby purchased) Shares properly
tendered at or below the Purchase Price and not withdrawn (subject only to
proration and conditional tender provisions of the Offer) only when, as and if
the Company gives oral or written notice to the Depositary of its acceptance of
such Shares for payment pursuant to the Offer. Payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such shares (or a timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase)), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal.
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
The Board of Directors has determined that the Company's financial
condition and outlook and current market conditions, including recent trading
prices of the Shares, makes this an attractive time to repurchase a significant
portion of the outstanding Shares, taking into account the significantly
increased interest expense and debt amortization and financial and operating
constraints associated with the borrowing required to fund the Offer. In the
view of the Board of Directors, the Offer represents a significant acceleration
of its anticipated continuing share repurchase program and an attractive
investment and use of the Company's cash generation abilities that should
benefit the Company and its shareholders over the long term. In particular, the
Board of Directors believes that the purchase of Shares at this time is
consistent with the Company's long term corporate goal of seeking to increase
shareholder value. Accordingly, the Company is providing shareholders with the
opportunity to determine the price or prices (not greater than $36.00 nor less
than $30.00 per Share) at which they are willing to sell their Shares, subject
to the terms and conditions of the Offer and without the usual transaction costs
associated with market sales. The Offer also allows shareholders to sell a
portion of their Shares while retaining a continuing equity position in the
Company if they so desire.
Upon the terms and subject to the conditions of the Offer, if more than
24,000,000 Shares have been properly tendered at prices at or below the Purchase
Price and not withdrawn prior to the Expiration Date, the Company will purchase
properly tendered Shares on the following basis: (a) first, all Shares properly
tendered and not withdrawn prior to the Expiration Date by any Odd Lot Holder
(as defined in the Offer to Purchase) who is a holder of record on July 26, 1996
and who: (1) tenders all Shares beneficially owned by such Odd Lot Holder at a
price at or below the Purchase Price (partial tenders will not qualify for this
preference); and (2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery; and (b)
second, after purchase of all of the foregoing Shares, all Shares conditionally
tendered, for which the condition was satisfied, and all other Shares tendered
properly and unconditionally at prices at or below the Purchase Price and not
withdrawn prior to the Expiration Date, on a pro rata basis (with appropriate
adjustments to avoid purchases of fractional Shares) as described below; and (c)
third, if necessary, Shares conditionally tendered, for which the condition was
not satisfied, at or below the Purchase Price and not withdrawn prior to the
Expiration Date, selected by random lot. The Company also reserves the right,
but will not be obligated, to purchase all Shares duly tendered by any
shareholder who tendered all Shares owned, beneficially or of record, at or
below the Purchase Price and who, as a result of proration, would then own,
beneficially or of record, an aggregate of fewer than 100 Shares. If the Company
exercises this right, it will increase the number of Shares that it is offering
to purchase by the number of Shares purchased through the exercise of the right.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, and payment for, any Shares
by giving oral or written notice of such extension to The First National Bank of
Boston (the "Depositary") and making a public announcement thereof.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the Company
pursuant to the Offer, may also be withdrawn at any time after 12:00 Midnight,
New York City time, on Tuesday, September 24, 1996. For a withdrawal to be
effective, a notice of withdrawal must be in written, telegraphic or facsimile
transmission form and must be received in a timely manner by the Depositary at
its address set forth on the back cover of the Offer to Purchase. Any such
notice of withdrawal must specify the name of the tendering shareholder, the
name of the registered holder, if different from that of the person who tendered
such Shares, the number of Shares tendered and the number of Shares to be
withdrawn. If the certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the tendering shareholder must also submit the serial numbers
shown on the particular certificates for Shares to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution).
If Shares have been tendered pursuant to the procedure for book-entry tender set
forth in the Offer to Purchase, the notice of withdrawal also must specify the
name and the number of the account at the applicable Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with the
procedures of such facility.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY TENDERS ARE MADE. The
information required to be disclosed by Rule 13e-4(d)(1) under the Securities
Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference. The Offer to Purchase and the related Letter
of Transmittal are being mailed to record holders of Shares and are being
furnished to brokers, banks and similar persons whose names or the names of
whose nominees, appear on the Company's shareholder list or, if applicable, who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares.
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
Additional copies of the Offer to Purchase and the Letter of Transmittal
may be obtained from the Depositary, the Information Agent or the Dealer Manager
and will be furnished promptly at the Company's expense.
The Information Agent for the Offer is:
[MACKENZIE
PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
The Dealer Manager for the Offer is:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
Call Toll-Free (800) 881-8320
July 30, 1996
- --------------------------------------------------------------------------------
<PAGE> 1
REEBOK LOGO
July 30, 1996
To Our Shareholders:
Reebok International Ltd. is offering to purchase up to 24,000,000 shares
of its common stock (the "Shares"), or approximately 33.1% of the currently
outstanding shares, from existing shareholders. The price will not be in excess
of $36.00 nor less than $30.00 per Share. Reebok is conducting the tender offer
through a procedure commonly referred to as a "Dutch auction." This allows you
to select the price within the specified price range at which you are willing to
sell your Shares to Reebok.
On July 26, 1996, the last trading day prior to the announcement of the
offer, the closing price per share for Reebok's common stock on the New York
Stock Exchange (the "NYSE") was $31.25, and on July 29, 1996, the last trading
day prior to the commencement of the offer, the closing price per share on the
NYSE was $34.75. Any shareholder whose Shares are purchased in the offer will
receive the total purchase price in cash and will not incur the usual
transaction costs associated with open-market sales. Any shareholders owning an
aggregate of less than 100 Shares whose Shares are purchased pursuant to the
offer will avoid the applicable odd lot discounts payable on sales of odd lots
on the NYSE.
The offer is explained in detail in the Offer to Purchase and Letter of
Transmittal. I encourage you to read these materials carefully before making any
decision with respect to the offer. If you desire to tender your Shares, the
instructions on how to tender Shares are also explained in detail in the
accompanying materials.
Neither Reebok nor its Board of Directors makes any recommendation to any
shareholder as to whether to tender or refrain from tendering their Shares. Each
shareholder must make the decision whether to tender Shares and, if so, how many
Shares and at what price or prices Shares should be tendered. The Company has
been advised that none of its directors or executive officers, including my wife
and I, intends to tender any Shares pursuant to the offer.
Sincerely,
Paul Fireman
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
July 28, 1996
Reebok International Ltd.
100 Technology Center Drive
Stoughton, Massachusetts 02072
Attention: Kenneth I. Watchmaker
Re: $1,700,000,000 Credit Facilities
Commitment Letter
Ladies and Gentlemen:
Reebok International Ltd. (the "Borrower") has advised Credit
Suisse ("Credit Suisse") that it intends to repurchase up to 24,000,000 shares
of its common stock at a price equal to $30-36 per share pursuant to a public
tender offer (the "Repurchase") and to immediately cancel such shares. You have
informed us that you will require aggregate credit facilities of up to
$1,700,000,000 (the "Credit Facilities") for the purpose of (a) financing the
Repurchase (and the fees and expenses relating thereto), (b) refinancing certain
outstanding indebtedness and (c) providing working capital to the Borrower and
its subsidiaries.
Credit Suisse is pleased to advise you that it is willing to
provide the full amount of the Credit Facilities. Although Credit Suisse is
committing to provide all of the Credit Facilities on the terms set forth in the
Term Sheet, it expects to act as agent for a syndicate of financial institutions
(together with Credit Suisse, the "Lenders") to provide all or a portion of the
Credit Facilities.
Attached as Exhibit A to this letter is a Statement of Terms and
Conditions (the "Term Sheet") setting forth the principal terms and conditions
on and subject to which Credit Suisse is willing to make available the Credit
Facilities. The terms and conditions of Credit Suisse's commitment hereunder and
of the Credit Facilities are not limited to those set forth herein and in the
Term Sheet, and any matters that are not covered by the provisions hereof and of
the Term Sheet shall be subject to our mutual agreement.
It is agreed that Credit Suisse will act as the sole administrative
agent for, and sole arranger and syndication manager of, the Credit Facilities
and that no additional agents or co-agents or arrangers will be appointed
without the prior written consent of Credit Suisse (after consultation with
you). In addition, Credit Suisse reserves the right to employ the
<PAGE> 2
services of CS First Boston Corporation ("CSFB") in providing the services
contemplated by this letter and you agree that, in connection with the provision
of such services, Credit Suisse and CSFB may share with each other such
confidential or other information relating to the Borrower and its subsidiaries
and affiliates as from time to time may be in their possession.
You agree to assist Credit Suisse in forming any such syndicate and
to provide Credit Suisse and the other Lenders, promptly upon request, with all
information reasonably requested by them to complete successfully the
syndication, including, but not limited to, (a) an information package for
delivery to potential syndicate members and participants and (b) all information
and projections prepared by you or your advisers relating to the transactions
described herein. You also agree to use your best efforts to ensure that Credit
Suisse's syndication efforts benefit from your existing lending relationships.
You further agree to make appropriate senior officers and representatives of the
Borrower available to participate in information meetings for potential
syndicate members and participants at such times and places as Credit Suisse may
reasonably request.
You represent and warrant and covenant that (a) all information
which has been or is hereafter made available to Credit Suisse by you or any of
your representatives in connection with the transactions contemplated hereby is
and will be complete and correct in all material respects and does not and will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) all financial projections that have been or are hereafter prepared by
you or on your behalf and made available to Credit Suisse or any other
participants in the Credit Facilities have been or will be prepared in good
faith based upon reasonable assumptions. You agree to supplement the information
and projections referred to in clauses (a) and (b) above from time to time until
completion of the syndication so that the representations and warranties in the
preceding sentence remain correct. In arranging and syndicating the Credit
Facilities, Credit Suisse will use and rely on such information and projections
without independent verification thereof.
In connection with the syndication of the Credit Facilities, Credit
Suisse may, in its discretion, allocate to other Lenders portions of any fees
payable to Credit Suisse in connection with the Credit Facilities. You agree
that no Lender will receive any compensation of any kind for its participation
in the Credit Facilities, except as expressly provided for in this letter or in
the Fee Letter referred to below.
The commitment of Credit Suisse hereunder also shall be subject to
(a) there not occurring or becoming known to us any material adverse condition
or material adverse change in or affecting the business, operations, property,
condition (financial or otherwise) or prospects of the Borrower and its
subsidiaries taken as a whole, (b) our completion of and satisfaction in all
respects with a due diligence investigation of legal matters with respect to the
Borrower, (c) our not becoming aware after the date hereof of any information or
other matter which is inconsistent in a material and adverse manner with any
information or other matter disclosed to us prior to the date hereof, (d) there
not having occurred a material disruption of or material adverse change in
financial, banking or capital market conditions that, in our judgment, could
- 2 -
<PAGE> 3
materially impair the syndication of the Credit Facilities, (e) our satisfaction
with the capital structure of the Borrower and its subsidiaries after giving
effect to the consummation of the Repurchase and the financing thereof
(including, without limitation, the sufficiency of amounts available under the
Revolving Credit Facility to meet the ongoing working capital needs of the
Borrower and its subsidiaries following the Repurchase and the consummation of
the other transactions contemplated hereby), (f) there not being any competing
offering, placement or arrangement of any debt securities or bank financing by
or on behalf of the Borrower or any of its subsidiaries, unless otherwise agreed
to by Credit Suisse, (g) our review and satisfaction with the terms of the
materials governing the Repurchase, (h) the negotiation, execution and delivery
on or before October 15, 1996 of definitive documentation with respect to the
Credit Facilities satisfactory to Credit Suisse and its counsel and (i) the
other conditions set forth in the Term Sheet.
The reasonable costs and expenses (including, without limitation,
the reasonable fees and expenses of counsel to Credit Suisse and Credit Suisse's
syndication and other out-of-pocket expenses) arising in connection with the
preparation, execution and delivery of this letter and the definitive financing
agreements shall be for your account. You further agree to indemnify and hold
harmless each Lender (including Credit Suisse) and each director, officer,
employee, affiliate (including, without limitation, CSFB) and agent thereof
(each, an "indemnified person") against, and to reimburse each indemnified
person, upon its demand, for, any losses, claims, damages, liabilities or other
expenses ("Losses") to which such indemnified person may become subject insofar
as such Losses arise out of or in any way relate to or result from the
Repurchase, this letter or the financing contemplated hereby, including, without
limitation, Losses consisting of legal or other expenses incurred in connection
with investigating, defending or participating in any legal proceeding relating
to any of the foregoing (whether or not such indemnified person is a party
thereto); provided that the foregoing will not apply to any Losses to the extent
that they are found by a final decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such
indemnified person or, to the extent that Credit Suisse is the indemnified
person, from any breach by Credit Suisse of its explicit obligations hereunder
due to factors within the control of Credit Suisse. Your obligations under this
paragraph shall remain effective whether or not definitive financing
documentation is executed and notwithstanding any termination of this letter.
Neither Credit Suisse nor any other indemnified person shall be responsible or
liable to any other person for consequential damages which may be alleged as a
result of this letter or the financing contemplated hereby and neither Credit
Suisse nor any other indemnified person shall be responsible or liable for any
damages which may be alleged as a result of its failure, in accordance with (and
not in violation of) the terms of this letter, to provide the Credit Facilities.
The provisions of this letter are supplemented as set forth in a
separate fee letter dated the date hereof from us to you (the "Fee Letter") and
are subject to the terms of such Fee Letter. By executing this letter, you
acknowledge that this letter and the Fee Letter are the only agreements between
you and Credit Suisse with respect to the Credit Facilities and set forth the
entire understanding of the parties with respect thereto. Neither this letter
nor the Fee Letter may be changed except pursuant to a writing signed by each of
the parties
- 3 -
<PAGE> 4
hereto. This letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
This letter is being delivered to you with the understanding that
neither this letter, the Fee Letter, nor any of their terms or substance, shall
be disclosed, directly or indirectly, to any other person except to your
employees, agents and advisers who are directly involved in the consideration of
this matter or as disclosure may be compelled to be disclosed in a judicial or
administrative proceeding or as otherwise required by law; provided that you may
freely disclose this letter (but not the Fee Letter), and its terms and
substance, at any time following your acceptance hereof and payment of the any
fees specified in the Fee Letter to be due and payable upon such acceptance.
If you are in agreement with the foregoing, please sign and return
to Credit Suisse the enclosed copies of this letter and the Fee Letter, together
with the acceptance fee referred to therein, no later than 12:01 a.m., New York
time, on July 29, 1996. This offer shall terminate at such time unless prior
thereto we shall have received signed copies of such letters and payment of such
fee.
We look forward to working with you on this transaction.
Very truly yours,
CREDIT SUISSE
/s/ Lynn Allegaert
By: _____________________________
Title: Member of Senior
Management
/s/ Chris Cunningham
By: _____________________________
Title: Member of Senior
Management
Accepted and agreed to as of the date first above written:
REEBOK INTERNATIONAL LTD.
/s/ Kenneth Watchmaker
By: ___________________________________
Title: Executive Vice President and
Chief Financial Officer
- 4 -
<PAGE> 5
Exhibit A
US$1,700,000,000 CREDIT FACILITIES
Summary of Terms and Conditions
July 28, 1996
-----------------------------
I. Parties
Borrower: Reebok International Ltd. (the "Borrower").
Lenders: The banks, financial institutions and other entities,
including Credit Suisse ("Credit Suisse"), selected in
the syndication effort (collectively, the "Lenders").
Administrative Agent
and Arranger: Credit Suisse (in such capacity, the "Administrative
Agent").
II. Type and Amount of Credit Facilities
A. Term Loan Facilities
Type of Facility: 6-year senior, secured, term loan facility in the amount
of $950,000,000 (the "Term Facility").
Availability: The Term Facility shall be available in a single drawing
on the date upon which the conditions precedent to
borrowing are satisfied (the "Closing Date").
Amortization: The loans under the Term Facility (the "Term Loans")
shall amortize in quarterly installments to be mutually
agreed upon, based upon the annual amounts set forth
below:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997 To be mutually
1998 agreed upon
1999
2000
2001
2002
</TABLE>
Use of Proceeds: To (a) purchase shares of common stock of the Borrower
which are tendered to it pursuant to the tender offer to
be commenced
<PAGE> 6
by the Borrower for the repurchase of up to
approximately 24,000,000 shares of its common
stock at a price equal to $30-36 per share
(the "Repurchase") and (b) pay any fees and
expenses relating thereto.
B. Revolving Credit Facility
Revolving Credit Facility: 6-year senior, secured revolving credit
facility in the amount of $750,000,000 (the
"Revolving Credit Facility"; together with
the Term Loan Facilities, the "Credit
Facilities").
Availability: The Revolving Credit Facility shall be
available on a revolving basis during the
period commencing on the Closing Date and
ending on the sixth anniversary thereof (the
"Termination Date")
Letters of Credit: A portion of the Revolving Credit Facility
not in excess of $450,000,000 shall be
available for the issuance of letters of
credit (the "Letters of Credit") by Credit
Suisse (in such capacity, the "Issuing
Lender"), including, without limitation,
foreign currencies to be mutually agreed
upon. No Letter of Credit shall have an
expiration date after the earlier of (a) one
year after the date of issuance and (b) five
business days prior to the Termination Date,
provided that any Letter of Credit with a
one-year tenor may provide for the renewal
thereof for additional one-year periods
(which shall in no event extend beyond the
date referred to in clause (b) above). A
portion to be mutually agreed upon of the
Letters of Credit shall be available for
trade letters of credit which denominated in
currencies other than US Dollars and/or
issued outside of the United States (the
"Local Letters of Credit").
Drawings under any Letter of Credit shall be
reimbursed by the Borrower (whether with its
own funds or with the proceeds of Revolving
Credit Loans) on the same business day. To
the extent that the Borrower does not so
reimburse the Issuing Lender, the Lenders
under the Revolving Credit Facility shall be
irrevocably and unconditionally obligated to
reimburse the Issuing Lender on a pro rata
basis.
Maturity: The Termination Date.
Purpose: The proceeds of the loans under the Revolving
Credit Facility (the "Revolving Credit
Loans"; together with the Term Loans, the
"Loans") shall be used by the Borrower and
its subsidiaries (a) for working capital
purposes in the ordinary course of
- 2 -
<PAGE> 7
business and (b) to refinance certain
existing indebtedness of the Borrower and its
subsidiaries.
III. General Payment Provisions
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments and
Commitment Reductions: Loans may be prepaid and commitments may be
reduced by the Borrower in minimum amounts to
be agreed upon. All such prepayments of the
Term Loans shall be applied ratably to the
remaining installments thereof.
Mandatory Prepayments
and Commitment
Reductions: Prior to the date upon which the Borrower
achieves an Investment Grade Rating (as
hereinafter defined), the Term Loan
Facilities shall be reduced with:
(a) the net cash proceeds of asset sales by
the Borrower and its subsidiaries
(subject to a minimum amount to be
mutually agreed upon);
(b) the net cash proceeds of the incurrence
of debt by the Borrower and its
subsidiaries (subject to exceptions to
be mutually agreed upon);
(c) the net cash proceeds of the offering
and sale of equity by the Borrower and
its subsidiaries, other than (i) the
sale or exercise of stock options, (ii)
the sale of stock under employee stock
purchase plans and (iii) the sale of
stock and/or stock options under
employee stock ownership or incentive
plans;
(d) insurance proceeds and recoveries, to
the extent that they exceed the
replacement cost or to the extent that
the Borrower and its subsidiaries are
not diligently proceeding to replace
the property; and
(e) 50% of excess cash flow for each fiscal
year of the Borrower and its
subsidiaries.
All such reductions shall be applied ratably
to the remaining installments of the Term
Loans or, to the extent that no Term Loans
are the outstanding, to the reduction of the
Revolving
- 3 -
<PAGE> 8
Credit Facility (and the cash
collateralization of any outstanding Letters
of Credit).
Any mandatory prepayments and commitment
reductions to be contained in the Credit
Documentation for periods after the Borrower
has achieved an Investment Grade Rating shall
be mutually agreed upon based upon those that
are customary for investment grade borrowers.
IV. Guarantees and Collateral
Guarantees: Each of the direct and indirect domestic
subsidiaries of the Borrower shall guarantee
the Credit Facilities.
Collateral: The Credit Facilities shall be secured by a
first priority, perfected security interest
in:
(a) 100% of the issued and outstanding
capital stock of each domestic
subsidiary of the Borrower;
(b) 65% of the issued and outstanding
capital stock of each first-tier
foreign subsidiary of the Borrower; and
(c) substantially all other assets of the
Borrower and its domestic subsidiaries
(including, without limitation,
inventory, accounts receivable and
intellectual property);
subject (in each such case) to (x) exceptions
for those assets as to which the
Administrative Agent shall determine in its
sole discretion that the costs of obtaining
such a security interest are excessive in
relation to the value of the security to be
afforded thereby, (y) exceptions for
immaterial subsidiaries and (z) other
exceptions to be mutually agreed upon.
The collateral described above will be
released (without any requirement of consent
of the Lenders) promptly upon the request of
the Borrower at any time when the Borrower
has an Investment Grade Rating. For purposes
hereof, the term "Investment Grade Rating"
shall mean that either the rating assigned to
the senior, unsecured, long-term debt of the
Borrower by (x) both Standard & Poor's and
Moody's is at least BBB-/Baa3 or (y) either
Standard & Poor's or Moody's is at least
BBB/Baa2.
- 4 -
<PAGE> 9
V. Certain Conditions
Initial Conditions: The availability of the Credit Facilities
shall be conditioned upon satisfaction of,
among other things, the following conditions
precedent (the date upon which all such
conditions precedent shall be satisfied, the
"Closing Date") on or before October 15,
1996:
1. The Borrower and each of its
subsidiaries shall have executed and
delivered the Credit Documentation to
which it is a party.
2. There shall be no material conditions
to the purchase and cancellation of the
shares tendered pursuant to the
Repurchase (other than the payment of
the purchase price therefor) and the
terms of the Repurchase (including,
without limitation, the purchase price
to be paid for each share of common
stock of the Borrower) shall be in form
and substance satisfactory. The
repurchased shares shall be cancelled
simultaneously with their repurchase.
3. The Lenders and the Administrative
Agent shall have received all fees and
expenses required to be paid on or
before the Closing Date.
4. All governmental and third party
approvals necessary or advisable in
connection with the Repurchase, the
financing contemplated hereby and the
continuing operations of the Borrower
and its subsidiaries shall have been
obtained and be in full force and
effect, and all applicable waiting
periods shall have expired without any
action being taken or threatened by any
competent authority which would
restrain, prevent or otherwise impose
adverse conditions on the Repurchase or
the financing thereof.
5. The Lenders shall have received (i)
audited consolidated financial
statements of the Borrower and its
subsidiaries for the two most recent
fiscal years ended prior to the Closing
Date as to which such financial
statements are available and (ii)
unaudited interim consolidated
financial statements of the Borrower
and its subsidiaries for each quarterly
period ended subsequent to the date of
the latest financial statements
delivered pursuant to clause (i) of
this paragraph as to which such
financial statements are
- 5 -
<PAGE> 10
available (with such interim
consolidated financial statements for
the fiscal quarter ended June 30, 1996
to be satisfactory to the Lenders).
6. The Lenders shall have received a
satisfactory pro forma consolidated
balance sheet of the Borrower as at the
date of the most recent consolidated
balance sheet delivered pursuant to
paragraph (f) above, adjusted to give
effect to the consummation on the
Closing Date of the Repurchase and the
financings contemplated hereby.
7. The Lenders shall have received a
solvency opinion from Houlihan Lokey
Howard & Zukin which shall document the
solvency of the Borrower and its
subsidiaries after giving effect to the
Repurchase and the other transactions
contemplated hereby.
8. The Lenders shall have received the
results of a recent lien search in each
of the jurisdictions and offices in the
United States where material assets of
the Borrower and its domestic
subsidiaries are located or recorded,
and such search shall reveal no liens
on any of the assets of the Borrower or
such subsidiaries, except for liens
permitted by the Credit Documentation
or otherwise approved by the
Administrative Agent.
9. The Administrative Agent shall be
satisfied with any necessary
intercreditor arrangements with the
holders of the indebtedness existing
under the First Supplemental Indenture,
dated January 22, 1993, of the
Borrower.
10. The Lenders shall have received such
legal opinions (including opinions (i)
from counsel to the Borrower and its
subsidiaries, and (ii) from such
special and local counsel as may be
required by the Administrative Agent),
documents and other instruments as are
customary for transactions of this type
or as they may reasonably request.
On-Going Conditions: The making of each extension of credit shall
be conditioned upon (a) all representations
and warranties in the Credit Documentation
being true and correct in all material
respects and (b) there being no default or
event of default in existence at the time of,
or after giving effect to the making of, such
extension of credit.
- 6 -
<PAGE> 11
As used herein and in the Credit
Documentation a "material adverse change"
shall mean any event, development or
circumstance that has had or could reasonably
be expected to have a material adverse effect
on (a) the consummation of the Repurchase,
(b) the business, assets, property, condition
(financial or otherwise) or prospects of the
Borrower or (c) the validity or
enforceability of any of the Credit
Documentation or the rights and remedies of
the Administrative Agent and the Lenders
thereunder.
VI. Representations, Warranties, Covenants and Events of Default
The Credit Documentation shall contain representations, warranties, covenants
and events of default customary for financings of this type and other terms
deemed appropriate by the Lenders, including, without limitation:
Representations
and Warranties: Accuracy of financial statements (including
pro forma financial statements); absence of
material undisclosed liabilities; no material
adverse change; corporate existence;
compliance with law; corporate power and
authority; enforceability of Credit
Documentation; no conflict with law or
contractual obligations; no material
litigation; no default; ownership of
property; liens; intellectual property; no
material burdensome restrictions; taxes;
Federal Reserve regulations; ERISA;
Investment Company Act; subsidiaries;
environmental matters; accuracy of
disclosure; and creation and perfection of
security interests.
Affirmative Covenants: Delivery of financial statements, reports,
accountants' letters, projections, officers'
certificates and other information requested
by the Lenders; payment of other obligations;
continuation of business and maintenance of
existence and material rights and privileges;
compliance with laws and material contractual
obligations; maintenance of property and
insurance; maintenance of books and records;
right of the Lenders to inspect property and
books and records; notices of defaults,
litigation and other material events;
compliance with environmental laws; and
(until such time as the collateral and
guarantees described above are released)
agreement to grant security interests in
after-acquired property. Certain of the
affirmative covenants shall be subject to
customary "baskets" to be mutually agreed
upon.
The Borrower shall be required to obtain
interest rate protection for at least 50% of
its funded, long-term debt within 180 days
- 7 -
<PAGE> 12
following the Closing Date upon terms and
conditions satisfactory to the Administrative
Agent.
Financial Covenants: To include (a) prior to the date upon which
the Borrower achieves an Investment Grade
Rating:
MAXIMUM LEVERAGE RATIO: The leverage ratio of
the Borrower and its subsidiaries on a
consolidated basis on the last day of any
fiscal quarter occurring during a period set
forth below shall not exceed the ratio set
forth below opposite such period:
Period Ratio
------ -----
To be mutually agreed upon
MINIMUM INTEREST COVERAGE RATIO: The interest
coverage ratio of the Borrower and its
subsidiaries on a consolidated basis for the
period of four consecutive fiscal quarters
ending during a period set forth below shall
not be less than the ratio set forth below
opposite such period:
Period Ratio
------ -----
To be mutually agreed upon
MINIMUM FIXED CHARGE COVERAGE RATIO: The
fixed charge coverage ratio of the Borrower
and its subsidiaries on a consolidated basis
for the period of four consecutive fiscal
quarters ending during a period set forth
below shall not be less than the ratio set
forth below opposite such period:
Period Ratio
------ -----
To be mutually agreed upon
(b) after the date upon which the Borrower
achieves an Investment Grade Rating, a
covenant package to be mutually agreed upon.
Negative Covenants: Limitations on: indebtedness (including
preferred stock); liens; guarantee
obligations; mergers, consolidations,
liquidations and dissolutions; sales of
assets; leases; dividends and other payments
in respect of capital stock; capital
expenditures; investments, loans and
advances; payments and modifications of
subordinated and other debt instruments;
transactions with
- 8 -
<PAGE> 13
affiliates; sale and leasebacks; changes in
fiscal year; negative pledge clauses; and
changes in lines of business. Certain of the
negative covenants shall be subject to
customary "baskets" and exceptions to be
mutually agreed upon.
Events of Default: Nonpayment of principal when due; nonpayment
of interest, fees or other amounts within 5
business days after the date when due;
material inaccuracy of representations and
warranties; violation of covenants (subject,
in the case of certain affirmative covenants,
to a 30-day grace period); cross-default on
material debt; bankruptcy; certain ERISA
events; material judgments; and actual or
asserted invalidity of any guarantee,
security document or security interest.
Certain of the events of default shall
include customary grace periods and/or
baskets to be mutually agreed upon.
VII. Certain Other Terms
Voting: Amendments and waivers with respect to the
Credit Documentation shall require the
approval of Lenders holding commitments
representing not less than a majority of the
aggregate amount of the Credit Facilities,
except that (a) the consent of each Lender
directly affected thereby shall be required
with respect to (i) reductions in the
principal amount of the Loans (absent an
actual repayment thereof) or extensions of
the Termination Date, (ii) reductions in the
rate of interest or any fee or extensions of
any due date thereof, (iii) increases in the
amount of any Lender's commitment, (b) except
in connection with an asset sale where the
net proceeds are being applied to reduce the
Credit Facilities or to the extent that the
Borrower has an Investment Grade Rating, the
consent of 66% of the Lenders shall be
required with respect to releases of material
collateral or guarantees and (c) the consent
of 100% of the Lenders shall be required with
respect to modifications to any of the voting
percentages.
Assignments
and Participations: The Lenders shall be permitted to assign and
sell participations in their Loans and
commitments, subject, in the case of
assignments (other than to another Lender or
to an affiliate of the assigning Lender), to
the consent of the Administrative Agent and
the Borrower (which consent in each case
shall not be unreasonably withheld) and to
the payment by the assigning Lender to the
Administrative Agent of a $3,500 transfer
fee. In the case of partial assignments, the
minimum assignment amount
- 9 -
<PAGE> 14
shall be $10,000,000, and, after giving
effect thereto, the assigning Lender shall
have commitments and Loans aggregating at
least $10,000,000. Participants shall have
the same benefits as the Lenders with respect
to yield protection and increased cost
provisions. Voting rights of participants
shall be limited to the customary "sacred
rights." Pledges of Loans in accordance with
applicable law shall be permitted without
restriction. Promissory notes shall be issued
under the Credit Facilities only upon
request. Non-pro rata assignments shall be
permitted.
Yield Protection: The Credit Documentation shall contain
customary provisions (a) protecting the
Lenders against loss of yield resulting from
changes in reserve, tax, capital adequacy and
other requirements of law and from the
imposition of withholding or other taxes and
(b) indemnifying the Lenders for "breakage
costs" incurred in connection with, among
other things, prepayment of a Eurocurrency
Loan (as defined in Annex I) on a day other
than the last day of an interest period with
respect thereto.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Administrative
Agent associated with the syndication of the
Credit Facilities and the preparation,
execution, delivery and administration of the
Credit Documentation and any amendment or
waiver with respect thereto (including the
reasonable fees and disbursements and other
charges of counsel) and (b) all out-of-
pocket expenses of the Administrative Agent
and the Lenders in connection with the
enforcement of the Credit Documentation
(including the reasonable fees and
disbursements and other charges of counsel).
The Borrower shall indemnify, pay and hold
harmless the Administrative Agent, the
Arranger and the Lenders (and their
respective directors, officers, employees and
agents) against any loss, liability, cost or
expense incurred in respect of the financing
contemplated hereby or the use or the
proposed use of proceeds thereof (except to
the extent resulting from the gross
negligence or willful misconduct of the
indemnified party).
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent: Simpson Thacher & Bartlett.
- 10 -
<PAGE> 15
Commitment
Termination Date: The Credit Documentation must have been
entered into on or before October 15, 1996.
- 11 -
<PAGE> 16
Annex I
Interest and Certain Fees
Interest Rate Options: The Borrower may elect that all or a portion
of the Loans borrowed by it bear interest at
a rate per annum equal to (a) the ABR plus
the Applicable Margin set forth on Annex II
hereto with respect thereto or (b) the
Eurocurrency Rate plus the Applicable Margin
set forth on Annex II hereto with respect
thereto. For purposes hereof:
"ABR" means the higher of (i)
the rate of interest publicly announced
by Credit Suisse as its prime rate in
effect at its principal office in New
York City (the "Prime Rate") and (ii)
the federal funds effective rate from
time to time plus 0.5%;
"Eurocurrency Rate" means the
rate (grossed-up for maximum statutory
reserve requirements for eurocurrency
liabilities) at which eurocurrency
deposits in the relevant denomination
currency for one, two, three or six
months (as selected by the Borrower)
are offered by Credit Suisse in the
relevant interbank eurocurrency market.
Letter of Credit Fees: The Borrower shall pay a commission on all
outstanding Letters of Credit at (a) in the
case of standby Letters of Credit, a per
annum rate equal to the Applicable Margin set
forth on Annex II which is then in effect
with respect to Eurodollar Loans on the face
amount of each such Letter of Credit and (b)
in the case of commercial Letters of Credit,
a flat rate on the face amount of each such
commercial Letter of Credit which is not less
than the commitment fee rate in effect on the
date when such commission is due. Such
commission shall be shared ratably among the
Lenders participating in the Revolving Credit
Facility and shall be payable quarterly in
arrears.
A fronting fee equal to 1/8 of 1% per annum
on the face amount of each Letter of Credit
shall be payable quarterly in arrears to the
Issuing Lender for its own account. In
addition, customary administrative, issuance,
amendment, payment and negotiation charges
shall be payable to the Issuing Lender for
its own account.
Interest Payment Dates: In the case of Loans bearing interest based
upon the ABR ("ABR Loans"), in arrears on the
last business day of each calendar quarter.
- 1 -
<PAGE> 17
In the case of Loans bearing interest based
upon the Eurocurrency Rate ("Eurocurrency
Loans"), on the last day of each relevant
interest period and, in the case of any
interest period longer than three months, on
each successive date three months after the
first day of such interest period.
Commitment Fees: The Borrower shall pay to the Administrative
Agent, for the ratable benefit of the
Lenders, a commitment fee calculated from
time to time at the rate per annum set forth
on Annex II opposite the pricing ratio which
is then in effect. Such commitment fee shall
be calculated based upon the average daily
unused portion of the Credit Facilities
(except that, only for purposes of
calculating the commitment fee, Local Letters
of Credit shall be deemed not to be a usage
of the Credit Facilities) and shall be
payable, in arrears, on the last business day
of each calendar quarter.
Default Rate: At any time when the Borrower is in default
in the payment of any amount due under the
Credit Facilities, (a) the principal of all
Loans shall bear interest at 2% above the
rate otherwise applicable thereto and (b)
overdue interest, fees and other amounts
shall bear interest at 2% above the rate
applicable to ABR Loans.
Rate and Fee Basis: All per annum rates shall be calculated on
the basis of a year of 360 days (or 365/366
days, in the case of ABR Loans the interest
rate payable on which is then based on the
Prime Rate) for actual days elapsed.
- 2 -
<PAGE> 18
Annex II
PRICING GRID
A. On each day when the Borrower is maintaining an Investment Grade
Rating, the rate per annum set forth below opposite the rating
then-assigned to the senior, unsecured, long-term debt of the Borrower
by Standard & Poor's and Moody's:
<TABLE>
<CAPTION>
Applicable Margin
--------------------------------
Rating ABR Loans Eurocurrency Loans Commitment Fee
------ --------- ------------------ --------------
<S> <C> <C> <C>
BBB+ or better by S&P and Baa1 0 bp 50 bp 15 bp
or better by Moody's
BBB or better by S&P and Baa2 0 bp 55 bp 20 bp
or better by Moody's, but not
BBB+ or better by S&P and Baa1
or better by Moody's
BBB- or better by S&P and Baa3 0 bp 65 bp 25 bp
or better by Moody's, but not
BBB or better by S&P and Baa or
better by Moody's
</TABLE>
B. On each day when the Borrower is not maintaining an Investment Grade
Rating, the rate per annum set forth below opposite the ratio of total
debt to EBITDA which is then in effect:
<TABLE>
<CAPTION>
Applicable Margin
--------------------------------
Ratio ABR Loans Eurocurrency Loans Commitment Fee
----- --------- ------------------ --------------
<S> <C> <C> <C>
Greater than or equal to 4.25x 125 bp 225 bp 50 bp
Less than 4.25x, but greater than 100 bp 200 bp 50 bp
3.75x
Less than or equal to 3.75x, but 75 bp 175 bp 37.5 bp
greater than 3.25x
Less than or equal to 3.25x, but 50 bp 150 bp 35 bp
greater than 2.75x
Less than or equal to 2.75x, but 25 bp 125 bp 31.25 bp
greater than 2.25x
Less than or equal to 2.25x, but 0 bp 100 bp 27.5 bp
greater than 1.75x
Less than or equal to 1.75x, but 0 bp 75 bp 25 bp
greater than 1.25x
Less than or equal to 1.25x 0 bp 50 bp 20 bp
</TABLE>
<PAGE> 1
REEBOK INTERNATIONAL LTD.
<TABLE>
CONSOLIDATED BALANCE SHEETS
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 80,393 $ 83,936
Accounts receivable, net of allowance for doubtful accounts (1995,
$46,401; 1994, $44,862).......................................... 506,563 532,475
Inventory........................................................... 635,012 624,625
Deferred income taxes............................................... 75,543 66,456
Prepaid expenses and other current assets........................... 45,418 29,952
---------- ----------
Total current assets........................................ 1,342,929 1,337,444
---------- ----------
Property and equipment, net........................................... 192,033 164,848
Non-current assets:
Intangibles, net of amortization.................................... 64,436 96,196
Deferred income taxes............................................... 2,910
Other............................................................... 56,825 48,063
---------- ----------
121,261 147,169
---------- ----------
$1,656,223 $1,649,461
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks.............................................. $ 66,682 $ 63,837
Current portion of long-term debt................................... 946 5,190
Accounts payable.................................................... 166,037 170,622
Accrued expenses.................................................... 144,585 157,479
Income taxes payable................................................ 47,956 102,392
Dividends payable................................................... 5,742 6,068
---------- ----------
Total current liabilities................................... 431,948 505,588
---------- ----------
Long-term debt, net of current portion................................ 254,178 131,799
Deferred income taxes................................................. 4,604
Minority interest..................................................... 31,081 21,569
Commitments and contingencies.........................................
Outstanding redemption value of equity put options.................... 39,123
Stockholders' equity:
Common stock, par value $.01; authorized 250,000,000 shares;
issued 111,015,133 shares in 1995, 117,155,611 shares in 1994.... 1,096 1,172
Additional paid-in capital.......................................... 167,953
Retained earnings................................................... 1,487,006 1,428,058
Less 36,210,902 shares in treasury at cost.......................... (603,241) (603,241)
Unearned compensation............................................... (1,208) (2,598)
Foreign currency translation adjustment............................. 11,636 (839)
---------- ----------
895,289 990,505
---------- ----------
$1,656,223 $1,649,461
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 2
REEBOK INTERNATIONAL LTD.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $3,481,450 $3,280,418 $2,893,900
Other income........................................... 3,126 7,165 33
---------- ---------- ----------
3,484,576 3,287,583 2,893,933
---------- ---------- ----------
Costs and expenses:
Cost of sales........................................ 2,114,084 1,966,138 1,719,869
Selling, general and administrative expenses......... 999,731 889,590 769,744
Special charges...................................... 72,098 8,449
Amortization of intangibles.......................... 4,067 4,345 10,052
Minority interest.................................... 11,423 8,896 8,261
Interest expense..................................... 25,725 16,515 25,021
Interest income...................................... (7,103) (6,373) (10,710)
---------- ---------- ----------
3,220,025 2,879,111 2,530,686
---------- ---------- ----------
Income before income taxes............................. 264,551 408,472 363,247
Income taxes........................................... 99,753 153,994 139,832
---------- ---------- ----------
Net income............................................. $ 164,798 $ 254,478 $ 223,415
========== ========== ==========
Net income per common share............................ $ 2.07 $ 3.02 $ 2.53
========== ========== ==========
Dividends per common share............................. $ 0.30 $ 0.30 $ 0.30
========== ========== ==========
Weighted average common and common equivalent shares
outstanding.......................................... 79,487 84,311 88,348
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 3
REEBOK INTERNATIONAL LTD.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DOLLAR AMOUNTS IN THOUSANDS
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL UNEARNED CURRENCY
----------------------- PAID-IN RETAINED TREASURY COMPEN- TRANSLATION
SHARES PAR VALUE CAPITAL EARNINGS STOCK SATION ADJUSTMENT
----------- --------- ---------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992............. 125,574,291 $1,256 $ 448,056 $1,000,615 $(603,241) $ (611) $ (7,419)
Net income.......................... 223,415
Adjustment for foreign currency
translation....................... (5,726)
Issuance of shares to certain
employees......................... 102,400 1 2,956 (2,957)
Amortization of unearned
compensation...................... 292
Shares repurchased and retired...... (6,235,100) (62) (193,959)
Shares issued under employee stock
purchase plans.................... 149,977 1 3,493
Shares issued upon exercise of stock
options........................... 310,730 3 4,648
Income tax reductions relating to
exercise of stock options......... 1,696
Dividends declared.................. (25,840)
----------- ------ --------- ---------- --------- -------- --------
Balance, December 31, 1993............ 119,902,298 1,199 266,890 1,198,190 (603,241) (3,276) (13,145)
Net income.......................... 254,478
Adjustment for foreign currency
translation....................... 12,306
Issuance of shares to certain
employees......................... 19,293 611 (611)
Amortization of unearned
compensation...................... 827
Shares repurchased and retired...... (3,261,200) (33) (112,105)
Shares retired...................... (16,000) (462) 462
Shares issued under employee stock
purchase plans.................... 158,965 2 4,082
Shares issued upon exercise of stock
options........................... 352,255 4 6,172
Income tax reductions relating to
exercise of stock options......... 2,765
Dividends declared.................. (24,610)
----------- ------ --------- ---------- --------- -------- --------
Balance, December 31, 1994............ 117,155,611 1,172 167,953 1,428,058 (603,241) (2,598) (839)
Net income.......................... 164,798
Adjustment for foreign currency
translation....................... 12,475
Issuance of shares to certain
employees......................... 43,545 1,558 (1,558)
Amortization of unearned
compensation...................... 1,008
Shares repurchased and retired...... (6,639,600) (66) (182,569) (42,835)
Shares retired...................... (67,200) (1) (1,385) (554) 1,940
Shares issued under employee stock
purchase plans.................... 161,377 2 4,253
Shares issued upon exercise of stock
options........................... 361,400 4 6,004
Put option contracts outstanding.... (15) (39,108)
Premium received from unexercised
equity put options................ 3,233
Income tax reductions relating to
exercise of stock options......... 953
Dividends declared.................. (23,353)
----------- ------ --------- ---------- --------- ------- --------
Balance, December 31, 1995............ 111,015,133 $1,096 $ 0 $1,487,006 $(603,241) $(1,208) $ 11,636
=========== ====== ========= ========== ========= ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
REEBOK INTERNATIONAL LTD.
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
AMOUNTS IN THOUSANDS
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 164,798 $ 254,478 $ 223,415
Adjustments to reconcile net income to
net cash provide by operating activities:
Depreciation and amortization.......................... 34,504 32,228 25,209
Amortization and intangibles........................... 4,067 4,345 10,052
Minority interest...................................... 11,423 8,896 8,261
Amortization of unearned compensation.................. 1,008 827 292
Deferred income taxes.................................. (1,573) (13,332) 17,470
Special charges........................................ 62,743 8,449
Changes in operating assets and liabilities, exclusive
of
those arising from business acquisitions:
Accounts receivable.................................. 16,157 (64,786) (44,682)
Inventory............................................ (29,531) (81,948) (84,020)
Prepaid expenses..................................... 7,841 (7,752) 2,023
Other................................................ (21,715) (15,789) (23,012)
Accounts payable and accrued expenses................ (25,327) 35,211 6,035
Income taxes payable................................. (55,553) 20,236 (6,959)
--------- --------- ---------
Total adjustments................................. 4,044 (81,864) (80,882)
--------- --------- ---------
Net cash provided by operating activities................... 168,842 172,614 142,533
--------- --------- ---------
Cash flows from investing activities:
Payments to acquire property and equipment................ (63,610) (61,839) (26,628)
Payments for business acquisitions, net of cash
acquired............................................... (4,297) (10,321)
Proceeds from sale of businesses held for sale............ 36,500
--------- --------- ---------
Net cash used for investing activities...................... (63,610) (66,136) (449)
--------- --------- ---------
Cash flows from financing activities:
Net borrowings of notes payable to banks.................. 2,426 37,148 19,961
Proceeds from issuance of common stock to employees....... 11,216 13,025 9,841
Dividends paid............................................ (23,679) (24,827) (26,276)
Repayments of long-term debt.............................. (112,445) (2,585) (4,351)
Proceeds from long-term debt.............................. 230,000 20,000
Proceeds from premium on equity put options............... 3,233
Repurchases of common stock............................... (225,470) (112,138) (194,021)
--------- --------- ---------
Net cash used for financing activities...................... (114,719) (89,377) (174,846)
Effect of exchange rate changes on cash..................... 5,944 (12,512) 6,723
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ (3,543) 4,589 (26,039)
--------- --------- ---------
Cash and cash equivalents at beginning of year.............. 83,936 79,347 105,386
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 80,393 $ 83,936 $ 79,347
========= ========= =========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 23,962 $ 19,135 $ 24,348
Income taxes paid......................................... 152,690 135,060 132,456
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 5
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
The Company and its subsidiaries design and market sports and fitness
products, including footwear and apparel, as well as footwear and apparel for
non-athletic "casual" use, under various trademarks, including REEBOK, WEEBOK,
THE PUMP, INSTAPUMP, Boks, the GREG NORMAN Logo, AVIA, ROCKPORT, and TINLEY.
Principles of Consolidation
The consolidated financial statements include the amounts of the Company
and its subsidiaries. All significant intercompany transactions and accounts are
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Recognition of Revenues
Sales are recognized upon shipment of products.
Advertising
Advertising production costs are expensed the first time the advertisement
is run. Media (TV and print) placement costs are expensed in the month the
advertising appears. Advertising expense (including cooperative advertising)
amounted to $157,573, $163,210 and $158,318 for the years ended December 31,
1995, 1994 and 1993, respectively.
Accounting for Stock-Based Compensation
The Company accounts for its stock compensation arrangements under the
provisions of APB25, "Accounting for Stock Issued to Employees," and intends to
continue to do so.
Cash Equivalents
Cash equivalents are defined as highly liquid investments with maturities
of three months or less at date of purchase.
Inventory Valuation
Inventory, substantially all finished goods, is recorded at the lower of
cost (first-in, first-out method) or market.
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation is computed
principally on the straight line method over the assets' estimated useful lives.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful lives of the assets.
<PAGE> 6
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
Intangibles
Excess purchase price over the fair value of assets acquired is amortized
using the straight line method over periods ranging from 5 to 40 years. Other
intangibles are amortized using the straight line method over periods ranging
from 3 to 40 years.
Foreign Currency Translation
Assets and liabilities of most of the Company's foreign subsidiaries are
translated at current exchange rates. Revenues, costs and expenses are
translated at the average exchange rates for the period. Translation adjustments
resulting from changes in exchange rates are reported as a separate component of
stockholders' equity. Other foreign currency transaction gains and losses are
included in the determination of net income.
For those foreign subsidiaries operating in a highly inflationary economy
or having the U.S. dollar as their functional currency, net nonmonetary assets
are translated at historical rates and net monetary assets are translated at
current rates. Translation adjustments are included in the determination of net
income.
Income Taxes
The Company accounts for income taxes in accordance with FASB Statement No.
109 "Accounting for Income Taxes" ("Statement 109"). Tax provisions and credits
are recorded at statutory rates for taxable items included in the consolidated
statements of income regardless of the period for which such items are reported
for tax purposes. Deferred income taxes are recognized for temporary differences
between financial statement and income tax bases of assets and liabilities for
which income tax benefits will be realized in future years.
Net Income Per Common Share
Net income per common share is computed based on the weighted average
number of common and common equivalent shares outstanding and the dilutive
effect of equity put options, if applicable.
2. SPECIAL CHARGES
The Company recorded special charges totaling $72,098 in 1995. In the
second quarter of 1995, the Company recorded a special charge of $18,034,
principally related to facilities consolidation and severance and other related
costs associated with the streamlining of certain segments of the Company's
operations. The after-tax effect of this charge was $11,235 or $0.14 per share.
In connection with the anticipated sale of the Company's Avia subsidiary, the
Company recorded a special charge of $54,064 in the fourth quarter of 1995 to
adjust the carrying value of Avia to its estimated fair value on sale. The
after-tax effect of this write-down was $33,699 or $0.44 per share. The sale of
Boston Whaler was completed on July 30, 1993 and the sale of Ellesse was
completed on September 28, 1993. In connection with these sales, the Company
recorded a pre-tax special charge of $8,499 in 1993.
<PAGE> 7
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Land........................................................... $ 32,226 $ 32,243
Buildings...................................................... 67,233 60,440
Machinery and equipment........................................ 189,731 156,046
Leasehold improvements......................................... 46,654 34,506
-------- --------
335,844 283,235
Less accumulated depreciation and amortization................. 143,811 118,387
-------- --------
$192,033 $164,848
======== ========
</TABLE>
4. INTANGIBLES
<TABLE>
Intangibles consist of the following:
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Excess of purchase price over fair value of assets
acquired (net of accumulated amortization of
$130,925 in 1995 and $128,545 in 1994)....................... $ 20,698 $ 49,811
Other intangible assets:
Purchased technology......................................... 52,827 52,827
Company tradename and trademarks............................. 49,144 50,104
Other.......................................................... 13,693 13,693
-------- --------
115,664 116,624
Less accumulated amortization.................................. 71,926 70,239
-------- --------
43,738 46,385
$ 64,436 $ 96,196
======== ========
</TABLE>
In connection with the special charge recorded in the fourth quarter of
1995 (see note 2), the Company wrote off the remaining $28,461 of excess
purchase price over fair value of assets acquired relating to Avia.
5. SHORT-TERM BORROWINGS
The Company has various arrangements with numerous banks which provide an
aggregate of approximately $838,000 of uncommitted facilities, substantially all
of which are available to the Company's foreign subsidiaries. Of this amount,
$245,000 is available for short-term borrowings and bank overdrafts, with the
remainder available for letters of credit for inventory purchases. In addition
to amounts reported as notes payable to banks, approximately $212,000 was
outstanding for open letters of credit for inventory purchases at December 31,
1995.
On October 31, 1995, the Company amended existing revolving credit
agreements totaling $300,000. The Company's existing $100,000 Loan Agreement was
amended to extend the commitment term an additional year until November 1, 2000
and to increase the amount committed to $150,000. The Company's existing
<PAGE> 8
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
$200,000 Credit Agreement was amended by extending the commitment term for an
additional year to October 30, 1996 and reducing the amount committed to
$150,000. Total committed facilities remain at $300,000. At December 31, 1995,
there were no borrowings outstanding under these agreements.
The Company has a Commercial Paper program through which it can borrow up
to $200,000 for periods up to 270 days. The borrowing amount was increased from
$125,000 on February 15, 1996. This program is supported, to the extent
available, by the unused portion of the Company's $300,000 revolving credit
agreements. As of December 31, 1995, the Company had no commercial paper
obligations outstanding.
The weighted average interest rate on notes payable to banks was 5.8% and
4.9% at December 31, 1995 and 1994, respectively.
6. LEASING ARRANGEMENTS
The Company leases various offices, warehouses, retail store facilities and
certain of its data processing and warehouse equipment under lease arrangements
expiring between 1996 and 2002.
<TABLE>
Minimum annual rentals for the five years subsequent to December 31, 1995
and in the aggregate are as follows:
<S> <C>
1996...................................................................... $ 37,567
1997...................................................................... 28,090
1998...................................................................... 23,216
1999...................................................................... 19,239
2000...................................................................... 13,876
2001 and thereafter....................................................... 20,477
--------
Total minimum lease obligations................................. $142,465
========
</TABLE>
Total rent expense for all operating leases amounted to $40,602, $29,167
and $23,868 for the years ended December 31, 1995, 1994 and 1993, respectively.
<PAGE> 9
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following:
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
Medium-term notes, bearing interest at rates approximating
6.75%, due May 15, 2000, with interest payable
semiannually on May 15 and November 15................... $100,000
9.75% debentures due September 15, 1998, with interest
payable semiannually on March 15 and September 15........ $ 99,645(A)
6.75% debentures due September 15, 2005, with interest
payable semiannually on March 15 and September 15........ 98,729(A)
Medium-term notes, bearing interest at rates approximating
6%, due July 15, 1998, with interest payable semiannually
on February 15 and August 15............................. 30,000
Medium-term notes, bearing interest at rates approximating
6%, due February 11, 1998, with interest payable
semiannually on February 15 and August 15................ 20,000 20,000
Bank and other notes payable............................... 6,395 17,344
-------- --------
255,124 136,989
Less current portion....................................... 946 5,190
-------- --------
$254,178 $131,799
======== ========
<FN>
- ---------------
(A) On September 13, 1995, $100,000 of 9.75% debentures were called and
refinanced with $100,000 of 6.75% debentures on September 18, 1995.
</TABLE>
Maturities of long-term debt during the five-year period ending December
31, 2000 are $946 in 1996, $2,875 in 1997, $50,282 in 1998, $297 in 1999, and
$100,280 in 2000.
8. EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution retirement plans covering
substantially all of its domestic employees and certain employees of its foreign
subsidiaries. Contributions are determined at the discretion of the Board of
Directors. Aggregate contributions made by the Company to the plans and charged
to operations in 1995, 1994, and 1993 were $11,644, $13,660 and $11,833,
respectively.
9. STOCK PLANS
The Company has stock option plans which provide for the grant of options
to purchase shares of the Company's common stock to key employees, other persons
or entities who make significant contributions to the success of the Company,
and eligible members of the Company's Board of Directors. The Board of Directors
approved the 1994 Equity Incentive Plan on December 15, 1993 which replaced
three of the Company's existing stock option and stock bonus plans. Under this
new Equity Incentive Plan, options may be incentive stock options or
"non-qualified options" under applicable provisions of the Internal Revenue
Code. The exercise price of any stock option granted may not be less than fair
market value at the date of grant except in the case of grants to participants
who are not executive officers of the Company and in certain limited
circumstances. The exercise period cannot exceed ten years from the date of
grant. The vesting
<PAGE> 10
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
schedule for options granted under the 1994 Equity Incentive Plan is determined
by the Compensation Committee of the Board of Directors. The Company also has an
option plan for its Directors. Under this plan a fixed amount of options are
granted annually to all non-employee Directors. Grants of options under the
Directors Plan vest in equal annual installments over three years.
<TABLE>
The following schedule summarizes the changes in stock options during the
three years ended December 31, 1995:
<CAPTION>
NUMBER OF SHARES UNDER OPTION
---------------------------------
NON-QUALIFIED OPTION
STOCK OPTIONS PRICE PER SHARE
------------- ---------------
<S> <C> <C>
Outstanding at December 31, 1992................. 5,511,138 8.75-39.77
Granted........................................ 1,605,800 11.38-41.74
Exercised...................................... (310,730) 8.75-27.63
Canceled....................................... (399,240) 11.38-33.25
--------- -----------
Outstanding at December 31, 1993................. 6,406,968 8.75-41.74
Granted........................................ 212,797 28.88-38.88
Exercised...................................... (352,255) 8.75-33.25
Canceled....................................... (387,935) 11.38-41.74
--------- -----------
Outstanding at December 31, 1994................. 5,879,575 8.75-39.77
Granted........................................ 1,361,502 28.75-36.75
Exercised...................................... (361,400) 8.75-33.25
Canceled....................................... (722,760) 11.38-39.77
--------- -----------
Outstanding at December 31, 1995................. 6,156,917 8.75-38.88
========= ===========
</TABLE>
At December 31, 1995 and 1994, options to purchase 3,956,545 and 3,241,684
shares of common stock were exercisable, and 3,369,311 and 4,351,514 options,
respectively, were available for future grants under the Company's stock option
plans.
The Company's 1994 Equity Incentive Plan also permits the Company to grant
restricted stock to key employees, and other persons or entities who make
significant contributions to the success of the Company. The restrictions and
vesting schedule for restricted stock granted under this Plan are determined by
the Compensation Committee of the Board of Directors.
The Company has two employee stock purchase plans. Under the 1987 Employee
Stock Purchase Plan eligible employees are granted options to purchase shares of
the Company's common stock through voluntary payroll deductions during two
option periods, running from January 1 to June 30 and from July 1 to December
31, at a price equal to the lower of 85% of market value at the beginning or end
of each period. Under the 1992 Employee Stock Purchase Plan, for certain foreign
based employees, eligible employees are granted options to purchase shares of
the Company's common stock during two option periods, running from January 1 to
June 30 and from July 1 to December 31, at the market price at the beginning of
the period. The option becomes exercisable 90 days following the date of grant
and expires on the last day of the option period.
During 1995, 1994 and 1993, respectively, 161,377, 158,965, and 149,977
shares were issued pursuant to these plans.
In June 1990, the Company adopted a shareholders' rights plan and declared
a dividend distribution of one common stock purchase right ("Right") for each
share of common stock outstanding. Each Right entitles the holder to purchase
one share of the Company's common stock at a price of $60 per share, subject to
adjustment. The Rights will be exercisable only if a person or group of
affiliated or associated persons acquires beneficial ownership of 10% or more of
the outstanding shares of the Company's common stock or commences a tender or
exchange offer that would result in a person or group owning 10% or more of the
outstanding
<PAGE> 11
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
common stock, or in the event that the Company is subsequently acquired in a
merger or other business combination. When the Rights become exercisable, each
holder would have the right to purchase, at the then-current exercise price,
common stock of the surviving company having a market value of two times the
exercise price of the Right. The Company can redeem the Rights at $.01 per Right
at any time prior to expiration on June 14, 2000.
At December 31, 1995, 10,313,239 shares of common stock were reserved for
issuance under the Company's various stock plans and 85,117,470 shares were
reserved for issuance under the shareholders' rights plan.
10. ACQUISITION OF COMMON STOCK
On October 19, 1995, the Board of Directors authorized the repurchase of up
to an additional $200 million in Reebok common stock in open market or
privately-negotiated transactions. This authorization was in addition to the
share repurchase programs of $200 million each adopted by the Company in July
1992, July 1993 and October 1994. As of December 31, 1995, the Company had
approximately $198 million available for future repurchases of common stock
under these programs.
11. EQUITY PUT OPTIONS
During 1995, the Company issued equity put options as part of its ongoing
share repurchase program. These options provide the Company with an additional
source to supplement open market purchases of its common stock. The options are
priced based on the market value of the Company's stock at the date of issuance.
The redemption value of the options, which represents the option price times the
number of shares under option is presented in the accompanying consolidated
balance sheet at December 31, 1995 as "Outstanding redemption value of Equity
Put Options." At December 31, 1995 1,450,000 shares of outstanding common stock
are subject to repurchase under the terms and conditions of these options. All
equity put options outstanding as of December 31, 1995 expire during 1996.
12. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company to estimate
the fair value of its financial instruments: Cash and cash equivalents and notes
payable to banks: the carrying amounts reported in the balance sheet approximate
fair value. Long term-debt: the fair value of the Company's medium term notes
and debentures is estimated based on quoted market prices. The fair value of
other long-term debt is estimated using discounted cash flow analyses, based on
the Company's incremental borrowing rates for similar types of borrowing
arrangements. Unrealized gains or losses on foreign currency exchange contracts:
the fair value of the Company's foreign currency exchange contracts is estimated
based on current foreign exchange rates.
<TABLE>
The carrying amounts and fair value of the Company's financial instruments
are as follows:
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1995 1994 1995 1994
-------- -------- -------- --------
CARRYING AMOUNT FAIR VALUE
--------------------- ---------------------
<S> <C> <C> <C> <C>
Long-term debt.......................... $255,124 $136,989 $261,860 $139,842
Unrealized gains (losses) on foreign
currency exchange contracts........... (1,108) (2,152) (1,108) (179)
</TABLE>
The Company enters into forward currency exchange contracts to hedge its
exposure for merchandise purchased in U.S. dollars that will be sold to
customers in other currencies. Realized and unrealized gains and losses on these
contracts are included in net income except that gains and losses on contracts
which hedge specific foreign currency commitments are deferred and accounted for
as a part of the transaction.
<PAGE> 12
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
The Company also uses forward currency exchange contracts to hedge
significant intercompany assets and liabilities denominated in other than the
functional currency. Contracts used to hedge intercompany balances are marked to
market and the resulting transaction gain or loss is included in the
determination of net income. Foreign currency gains or losses included in net
income for the years ended December 31, 1995, 1994 and 1993 were not
significant.
The Company has used forward exchange contracts as an element of its risk
management strategy for several years. Although forward exchange contracts
entail some risk of non-performance by counterparties, the Company manages this
risk by establishing dollar and term limits (in total and by financial
institution) and also monitors the creditworthiness of the financial
institutions with whom derivatives are executed.
At December 31, 1995, the Company had forward currency exchange contracts,
all having maturities of less than one year, with a notional amount aggregating
$377,042. The contracts involved 12 different foreign currencies. No single
currency represented more than 25% of the aggregate notional amount. The
notional amount of contracts intended to hedge merchandise purchases was
$178,140. Deferred gains (losses) on these contracts were not material at
December 31, 1995 and 1994.
13. INCOME TAXES
<TABLE>
The components of income before income taxes are as follows:
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Domestic........................................... $ 14,292 $171,166 $141,428
Foreign............................................ 250,259 237,306 221,819
-------- -------- --------
$264,551 $408,472 $363,247
======== ======== ========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.......................................... $ 3,998 $ 66,879 $ 39,725
State............................................ 13,878 16,607 14,082
Foreign.......................................... 83,450 83,840 68,555
-------- -------- --------
101,326 167,326 122,362
-------- -------- --------
Deferred:
Federal.......................................... (1,594) (3,038) 16,244
State............................................ (3,112) (303) (310)
Foreign.......................................... 3,133 (9,991) 1,536
-------- -------- --------
(1,573) (13,332) 17,470
-------- -------- --------
$ 99,753 $153,994 $139,832
======== ======== ========
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $410,402, $316,099 and $215,559 at December 31, 1995, 1994 and
1993, respectively. Those earnings are considered to be indefinitely reinvested
and, accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes and foreign
withholding taxes, less an adjustment for applicable foreign tax credits.
Determination of the amount of U.S. income tax liability that would be incurred
is not
<PAGE> 13
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
practicable because of the complexities associated with its hypothetical
calculation; however, unrecognized foreign tax credits would be available to
reduce some portion of any U.S. income tax liability.
<TABLE>
Income taxes computed at the federal statutory rate differ from amounts
provided as follows:
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate.......................................... 35.0% 35.0% 35.0%
State taxes, less federal tax effect........................... 2.7 2.6 2.5
Effect of tax rates of foreign subsidiaries and joint
ventures..................................................... (2.0) (1.3) (.8)
Effect of minority interest.................................... 1.5 .8 .8
Amortization of intangibles.................................... .4 .5 .6
Other, net..................................................... .1 .1 .4
---- ---- ----
Provision for income taxes..................................... 37.7% 37.7% 38.5%
==== ==== ====
</TABLE>
Effective January 1, 1993, the Company adopted Statement 109. Under
Statement 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Prior to the adoption of Statement
109, income tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and were
measured at the tax rate in effect in the year the difference originated.
As permitted by Statement 109, the Company did not restate the financial
statements of any prior years. The effect of the change on net income for 1993
was not material.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
<TABLE>
Deferred taxes are attributable to the following temporary differences at:
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Inventory................................................ $34,570 $34,757
Accounts receivable...................................... 25,810 27,825
Other -- net............................................. 10,559 6,784
------- -------
$70,939 $69,366
======= =======
</TABLE>
<PAGE> 14
REEBOK INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
OPERATIONS BY GEOGRAPHIC AREA
<TABLE>
Sales to unaffiliated customers, net income and identifiable assets by
geographic area are summarized below:
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Sales:
United States................................ $2,027,080 $1,974,904 $1,775,496
United Kingdom............................... 492,843 506,658 434,249
Europe....................................... 642,622 536,629 479,640
Other countries.............................. 318,905 262,227 204,515
---------- ---------- ----------
$3,481,450 $3,280,418 $2,893,900
========== ========== ==========
Net income:
United States................................ $ 36,176 $ 126,916 $ 98,692
United Kingdom............................... 69,277 62,949 65,734
Europe....................................... 20,648 44,290 36,915
Other countries.............................. 38,697 20,323 22,074
---------- ---------- ----------
$ 164,798 $ 254,478 $ 223,415
========== ========== ==========
Identifiable assets:
United States................................ $ 818,539 $ 963,462 $ 916,962
United Kingdom............................... 291,825 282,795 152,206
Europe....................................... 311,903 230,912 153,492
Other countries.............................. 233,956 172,292 169,051
---------- ---------- ----------
$1,656,223 $1,649,461 $1,391,711
========== ========== ==========
</TABLE>
The 1994 and 1993 operations information by geographic area for Europe and
other countries was updated in order to reflect the present country boundaries.
There are various differences between income before income taxes for
domestic and foreign operations as shown in Note 13 and net income shown above.
CONTINGENCIES
On August 29, 1995, the Company obtained a favorable ruling on its motion
for summary judgment in the lawsuit entitled Stutz Motor Car of America, Inc. v
Reebok International Ltd.,(filed on July 1, 1993 in the Central District of Los
Angeles County Superior Court as Case Number BC074579 and removed to the United
States District Court for the Central District of California where it was
assigned Civil Action No. 93-443LGB) and, as a result, the case was dismissed.
The Plaintiff has appealed the decision. The Company believes that the
Plaintiff's appeal is without merit and is confident that the District Court
decision will be upheld.
During 1995, the Company's settlement with the National Association of
Attorneys General ("NAAG") relating to the investigation by NAAG against the
Company was approved by the Federal Court for the Southern District of New York
on October 20, 1995. The Court's order approving the settlement was appealed to
the Second Circuit Court of Appeals on January 9, 1996 by counsel purporting to
represent a class of Reebok and Rockport consumers. The Company is currently
awaiting a decision on the appeal, which it believes to be without merit.
<PAGE> 15
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Reebok International Ltd. Stoughton, Massachusetts
We have audited the accompanying consolidated balance sheets of Reebok
International Ltd. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Reebok International Ltd. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 30, 1996
<PAGE> 16
REEBOK INTERNATINAL LTD.
<TABLE>
QUARTERLY RESULTS OF OPERATIONS
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Year ended December 1995
Net sales................................... $935,478 $788,692 $1,005,980 $751,300
Gross profit................................ 378,079 316,847 391,145 281,295
Net income.................................. 65,917 21,404 76,202 1,275
Net income per common share................. .80 .26 .96 .02
Cash dividends per common share............. .075 .075 .075 .075
-------- ---------- -------- --------
Year ended December 1994
Net sales................................... $857,666 $776,753 $ 937,148 $709,151
Gross profit................................ 337,522 307,774 375,330 293,654
Net income.................................. 65,789 51,008 84,655 53,026
Net income per common share................. .77 .60 1.01 .64
Cash dividends per common share............. .075 .075 .075 .075
-------- ---------- -------- --------
</TABLE>
Net income for the second quarter of 1995 includes an after-tax special
charge of $11,235 ($0.14 per share). Net income for the fourth quarter of 1995
includes an after-tax special charge of $33,699 ($0.44 per share).
<PAGE> 1
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995 1995
---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 109,062 $ 89,661 $ 80,393
Accounts receivable, net
of allowance for doubtful
accounts (June 1996, $49,408;
June 1995, $51,370;
December 1995, $46,401) 654,549 627,804 506,563
Inventory 607,080 734,175 635,012
Deferred income taxes 63,696 76,447 75,543
Prepaid expenses and other
current assets 36,316 28,784 45,418
---------- ---------- ----------
Total current assets 1,470,703 1,556,871 1,342,929
---------- ---------- ----------
Property and equipment, net 191,933 190,307 192,033
Non-current assets:
Intangibles, net of
amortization 69,965 97,876 64,436
Deferred income taxes 5,862 3,516
Other 57,631 43,205 56,825
---------- ---------- ----------
133,458 144,597 121,261
---------- ---------- ----------
$1,796,094 $1,891,775 $1,656,223
========== ========== ==========
</TABLE>
-2-
<PAGE> 2
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995 1995
---- ---- ----
(Amounts in thousands, except share data)
<S> <C> <C> <C>
Current liabilities:
Notes payable to banks $ 65,123 $ 71,340 $ 66,682
Commercial paper 65,000 85,000
Current portion of
long-term debt 1,004 2,662 946
Accounts payable 183,481 166,883 166,037
Accrued expenses 187,893 189,753 144,585
Income taxes payable 71,204 110,087 47,956
Dividends payable 5,529 5,924 5,742
---------- ---------- ----------
Total current liabilities 579,234 631,649 431,948
---------- ---------- ----------
Long-term debt, net of
current portion 266,181 237,528 254,178
Deferred income taxes 4,604
Minority interest 27,290 27,718 31,081
Commitments and contingencies
Outstanding redemption value of
equity put options 32,863 39,123
Stockholders' equity:
Common stock, par value $.01;
authorized 250,000,000 shares;
issued June 30, 1996; 108,163,925
issued June 30, 1995, 114,729,016;
issued December 31, 1995,
111,015,133 1,082 1,147 1,096
Additional paid-in capital 79,736
Retained earnings 1,503,118 1,503,389 1,487,006
Less 36,716,225 shares
at June 30, 1996 and
36,210,902 at
June 30, 1995 and
December 31, 1995
in treasury at cost (617,620) (603,241) (603,241)
Unearned compensation (507) (2,188) (1,208)
Foreign currency translation
adjustment 4,453 16,037 11,636
---------- ---------- ----------
890,526 994,880 895,289
---------- ---------- ----------
$1,796,094 $1,891,775 $1,656,223
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-3-
<PAGE> 3
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $817,572 $788,692 $1,720,495 $1,724,170
Other income 766 915 1,528 2,053
-------- -------- ---------- ----------
818,338 789,607 1,722,023 1,726,223
Costs and expenses:
Cost of sales 505,304 471,845 1,057,095 1,029,244
Selling, general and
administrative expenses 274,551 258,049 538,095 523,312
Special charges 18,034 18,034
Amortization of intangibles 629 1,054 1,255 2,056
Minority interest 2,320 1,443 6,954 4,820
Interest expense 6,808 5,726 13,336 10,600
Interest income (3,090) (900) (4,240) (2,005)
-------- -------- ---------- ----------
786,522 755,251 1,612,495 1,586,061
-------- -------- ---------- ----------
Income before income taxes 31,816 34,356 109,528 140,162
Income taxes 12,003 12,952 41,300 52,841
-------- -------- ---------- ----------
Net income $ 19,813 $ 21,404 $ 68,228 $ 87,321
======== ======== ========== ==========
Net income per common share $ 0.27 $ 0.26 $ 0.92 $ 1.07
======== ======== ========== ==========
Dividends per common share $ 0.075 $ 0.075 $ 0.15 $ 0.15
======== ======== ========== ==========
Weighted average common and
common equivalent shares
outstanding 73,922 81,082 74,540 81,625
======== ======== ========== ==========
</TABLE>
Certain amounts in 1995 have been reclassified to permit comparisons.
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE> 4
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1996 1995
---- ----
(Amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 68,228 $ 87,321
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 17,135 17,167
Amortization of intangibles 1,255 2,056
Minority interest, net of dividends paid 6,954 4,820
Amortization of unearned compensation (88) 1,043
Deferred income taxes 1,153 (10,626)
Changes in operating assets and
liabilities:
Accounts receivable (157,601) (77,394)
Inventory 18,532 (88,691)
Prepaid expenses 8,786 1,595
Other 1,803 (11,888)
Accounts payable 22,686 (10,875)
Accrued expenses 40,404 30,406
Income taxes payable 23,082 7,290
--------- ---------
Total adjustments (15,899) (135,097)
--------- ---------
Net cash (used for) provided by
operating activities 52,329 (47,776)
--------- ----------
Cash flows from investing activity:
Payments to acquire property and
equipment (19,407) (36,522)
--------- ---------
Net cash (used for)
investing activity (19,407) (36,522)
--------- ---------
</TABLE>
-5-
<PAGE> 5
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
---- ----
(amounts in thousands)
<S> <C> <C>
Cash flows from financing activities:
Net borrowings of notes payable to banks $ 2,125 $ 13
Proceeds from issuance of commercial paper 65,000 85,000
Net borrowings of long-term debt 11,542 101,125
Proceeds from issuance of common stock to
employees 2,688 6,853
Dividends paid (11,222) (12,134)
Proceeds from premium on equity put options 717
Repurchases of common stock (64,391) (95,728)
-------- --------
Net cash provided by
financing activities 6,459 85,129
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (10,712) 4,894
-------- --------
Net increase in cash and cash 28,669 5,725
equivalents
-------- --------
Cash and cash equivalents at beginning of period 80,393 83,936
-------- --------
Cash and cash equivalents at end of period $109,062 $ 89,661
======== ========
Supplemental disclosures of cash flow information:
1996 1995
---- ----
Cash paid during the period for:
Interest $ 13,279 $ 11,798
Income taxes 24,955 45,146
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-6-
<PAGE> 6
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
NOTE 2 - CONTINGENCIES
- ------------------------------
On August 29, 1995, the Company obtained a favorable ruling on its motion for
summary judgment in the lawsuit entitled Stutz Motor Car of America, Inc. v.
Reebok International Ltd., (filed on July 1, 1993 in the Central District of Los
Angeles County Superior Court as Case Number BC074579 and removed to the United
States District Court for the Central District of California where it was
assigned Civil Action No. 93-4433LGB) and, as a result, the case was dismissed.
The Plaintiff has appealed the decision. The Company believes that the
Plaintiff's appeal is without merit and is confident that the District Court
decision will be upheld.
The Company's settlement with the National Association of Attorneys General
("NAAG") relating to the investigation by NAAG against the Company was approved
by the Federal Court for the Southern District of New York on October 20, 1995.
The Court's order approving the settlement was appealed to the Second Circuit
Court of Appeals on January 9, 1996 by counsel purporting to represent a class
of Reebok and Rockport consumers. The Company is currently awaiting a decision
on the appeal, which it believes to be without merit.
-7-
<PAGE> 7
NOTE 3 - RALPH LAUREN LICENSING ARRANGEMENT
- -------------------------------------------
On May 23, 1996, Reebok finalized a long-term exclusive footwear
licensing arrangement with Ralph Lauren to design, develop, manufacture, market
and distribute men's, women's and children's footwear under the Ralph Lauren
label. The Ralph Lauren footwear business will be managed by Reebok's
subsidiary, The Rockport Company, Inc., which has established a separate
subsidiary to operate this business. In conjunction with the licensing
arrangement, Rockport acquired Ralph Lauren's prior licensee for the U.S. and
Canada, Ralph Lauren Footwear, Inc.
NOTE 4 - SALE OF AVIA
- ----------------------
On June 7, 1996 Reebok completed the sale of substantially all of the
operating assets and business of its subsidiary, AVIA Group International, Inc.
to American Sporting Goods Corporation. The proceeds from sale of Avia, net of
proceeds disbursed for the acquisition of Ralph Lauren Footwear, Inc. (see Note
3) were immaterial to the consolidated financial position and cash flows of the
Company.
NOTE 5 - Special Charges
- ------------------------
In the second quarter of 1995, the Company recorded a special charge of
$18,034, principally related to facilities consolidation and severance and other
related costs associated with the streamlining of certain segments of the
Company's operations. The after-tax effect of this charge was $11,235 or $0.14
per share.
NOTE 6 - Equity Put Options
- ---------------------------
At June 30, 1996, 1,200,000 shares of outstanding common stock are
subject to repurchase at prices ranging from $26.875 to $28.420 under the terms
and conditions of these options. The outstanding options expire between July 22,
1996 and December 12, 1996.
-8-
