<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
REEBOK INTERNATIONAL LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[REEBOK LOGO]
REEBOK INTERNATIONAL LTD.
100 TECHNOLOGY CENTER DRIVE
STOUGHTON, MASSACHUSETTS 02072
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Reebok
International Ltd. will be held at The First National Bank of Boston, First
Floor Auditorium, 100 Federal Street, Boston, Massachusetts at 10:00 a.m. local
time on Thursday, May 1, 1997 for the following purposes:
1. To elect two Class I members of the Board of Directors.
2. To approve an amendment to the 1994 Equity Incentive Plan to increase
the number of shares of Common Stock authorized for issuance by
2,500,000 shares.
3. To consider a shareholder proposal to reorganize the Board of Directors
into one class.
4. To transact any other business that may properly come before the Meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 11, 1997 are
entitled to notice of and to vote at the Meeting and any adjournment thereof.
If you are unable to be present in person, please sign and date the
enclosed proxy and return it promptly in the enclosed envelope.
By Order of the Board of Directors
JOHN E. BEARD
Clerk
March 26, 1997
<PAGE> 3
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 1997
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Reebok International Ltd. ("Reebok" or the "Company") to be voted at the Annual
Meeting of Shareholders to be held on May 1, 1997 or at any adjournment thereof
(the "Meeting"). The cost of solicitation of proxies on behalf of the Company's
management will be borne by Reebok. The Company has retained MacKenzie Partners,
Inc. to aid in the solicitation of proxies. MacKenzie Partners, Inc. will
receive a fee and reimbursement of expenses, estimated not to exceed $10,000,
all of which will be paid by the Company. Directors, officers and employees of
Reebok may also solicit proxies by telephone, telegraph or personal interview.
Reebok will reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
on behalf of the Company's management to the beneficial owners of shares.
Only shareholders of record at the close of business on March 11, 1997 are
entitled to notice of and to vote at the Meeting. There were 56,070,845 shares
of the Company's common stock, $.01 par value per share ("Common Stock"),
outstanding on that date, each of which is entitled to one vote. Under the
bylaws of the Company, a majority of the shares of Common Stock issued and
outstanding and entitled to vote will constitute a quorum for the Meeting. If a
quorum is present, the two nominees for director who receive the greatest number
of votes properly cast (or a plurality of the votes) will be elected directors.
An affirmative majority of the votes properly cast at the Meeting in person or
by proxy is required for approval of proposals 2 and 3. Votes cast by proxy or
in person at the Annual Meeting will be counted by persons selected by the
Company to act as election inspectors for the Meeting.
The election inspectors will count shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
Meeting held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have the discretionary voting power on a particular
matter) only as shares that are present and entitled to vote on the matters for
purposes of determining the presence of a quorum, but neither proxies that
withhold authority (without naming an alternative nominee), abstentions nor
broker non-votes will be counted as votes cast at the Annual Meeting. Such
proxies therefore will have no effect on the outcome of voting with respect to
the election of directors at the meeting or proposals 2 and 3.
Shares represented by proxies in the form enclosed, if properly executed
and returned and not revoked, will be voted at the Meeting. To be voted, proxies
must be filed with the Clerk prior to voting. Proxies may be revoked at any time
before exercise by filing a notice of such revocation with the Clerk. Proxies
will be voted as specified by the shareholders. Where specific choices are not
indicated, proxies will be voted FOR the election of all of the nominees for
director identified below, FOR proposal 2, AGAINST proposal 3 and in the
discretion of the named proxies as to any other matter that may come before the
meeting or any adjournments thereof.
The Annual Report to Shareholders for Reebok's fiscal year ended December
31, 1996 has been mailed with this Proxy Statement. This Proxy Statement and the
enclosed proxy were mailed to shareholders on the same date as the date of the
Notice of Annual Meeting. The principal executive offices of Reebok are located
at 100 Technology Center Drive, Stoughton, Massachusetts 02072.
1
<PAGE> 4
ELECTION OF DIRECTORS
Pursuant to the provisions of Section 50A of Chapter 156B of the
Massachusetts General Laws, the Board of Directors is divided into three
classes, having staggered terms of three years each. Under Section 50A and the
by-laws of the Company, the Board of Directors may determine the total number of
directors and the number of directors to be elected at any Annual Meeting of
Shareholders or Special Meeting in lieu thereof. The Board of Directors has
fixed at twelve the total number of directors and has fixed at two the number of
directors to be elected at the 1997 Annual Meeting. Of the current directors,
three Class I directors have terms expiring at the 1997 Annual Meeting, four
Class II directors have terms expiring at the 1998 Annual Meeting, and three
Class III directors have terms expiring at the 1999 Annual Meeting. Two of the
three directors whose terms expire at the 1997 Annual Meeting have been
nominated by the Board of Directors for reelection at such Meeting. Mr. Quelch
is not standing for reelection. Each Class I director elected at the 1997 Annual
Meeting will serve until the 2000 Annual Meeting of Shareholders or Special
Meeting in lieu thereof, and until that director's successor is elected and
qualified.
INFORMATION WITH RESPECT TO NOMINEES
Unless authority is withheld, proxies in the accompanying form will be
voted in favor of electing as Class I directors, to hold office until the Annual
Meeting of Shareholders in 2000 or Special Meeting in lieu thereof, and until
their respective successors are elected and qualified, the two persons
identified in the table below. If the proxy is executed in such a manner as to
withhold authority to vote for one or more nominees for director, such
instructions will be followed by the persons named as proxies.
All of the nominees for director are now Class I members of the Board of
Directors. The Company has no reason to believe that any of the nominees will be
unable to serve. In the event that any nominee should not be available, the
persons named in the proxy will vote for the others and may vote for a
substitute for such nominee.
Listed below are the nominees for Class I director, with information
showing the business experience and current public directorships, if any, of
each, the age of each and the year each was first elected a director of the
Company.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
<S> <C> <C> <C>
Mannie L. Jackson............. Chairman, Chief Executive Officer and 57 1996
majority owner of Harlem Globetrotters
International, Inc., a sports and
entertainment entity; Retired Senior Vice
President-Corporate Marketing and
Administration of Honeywell, Inc., a
manufacturer of control systems, and prior
to that, served in various executive
capacities for Honeywell since 1968;
Director of Ashland Inc., a vertically
integrated petroleum and chemical company;
Director of Jostens Inc., a manufacturer and
distributor of recognition awards; Director
of The Stanley Works, a commercial, consumer
and specialty tools company.
Geoffrey Nunes................ Senior Vice President and General Counsel, 66 1986
Millipore Corporation, a leader in the field
of separation technology.
</TABLE>
John A. Quelch, age 45, who has been a director of the Company since 1985
and who presently serves as a Class I member of the Board of Directors, is not
standing for reelection.
2
<PAGE> 5
Class II members of the Board of Directors having terms of office expiring
at the 1998 Annual Meeting of Shareholders are as follows:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ---------------------- --- --------
<S> <C> <C> <C>
Paul R. Duncan................ Executive Vice President of the Company 56 1989
(since 1990), with responsibility for
special projects (since November 1996);
President of the Company's Specialty
Business Group (from October 1995 to
November 1996); Chief Operating Officer,
Reebok Division (from June 1995 to October
1995); Chief Financial Officer of the
Company (from 1985 to June 1995); Director
of BGS Systems, Inc., a computer software
development company; Director of Cabletron
Systems, Inc., a computer networking
company.
William F. Glavin............. President, Babson College; Director of INCO 64 1994
Ltd., a producer of primary metals, alloys
and engineered products; Director of The
Caldor Corporation, a discount retailer; and
Director of John Hancock Mutual Funds, Inc.,
a mutual fund company.
Richard G. Lesser............. Executive Vice President and Chief Operating 62 1988
Officer of TJX Companies, Inc., an off-price
apparel and home furnishings retailer and
since February 1996 President, The Marmaxx
Group, a division of TJX Companies, Inc.
which operates T.J. Maxx and Marshalls.
William M. Marcus............. Executive Vice President, Treasurer and 59 1981
Director of American Biltrite Inc., a
manufacturer of flooring and tape products;
Director of Congoleum Corp., a sheet vinyl
and floor tile manufacturing company.
</TABLE>
Class III members of the Board of Directors having terms of office expiring
at the 1999 Annual Meeting of Shareholders are as follows:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
--- ---------------------- --- --------
<S> <C> <C> <C>
Paul B. Fireman............... Chief Executive Officer and Chairman of the 53 1979
Board of Directors of the Company; President
of the Company (from 1979 to March 1987 and
since December 1989); Director of Abiomed,
Inc., a manufacturer of medical devices.
Robert Meers.................. Executive Vice President of the Company 53 1993
(since February 1994) and President and
Chief Executive Officer of the Reebok
Division (since October 1995); President of
the Company's Specialty Business Group
(February 1994 to October 1995); President,
Reebok Division U.S. Operations (from
November 1990 to January 1994) and Canadian
Operations (January 1993 to January 1994).
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
--- ---------------------- --- --------
<S> <C> <C> <C>
Bertram M. Lee, Sr............ Chairman of the Board of BML Associates 58 1990
Inc., a holding company; Chairman and
Treasurer of Albimar Communications Co., a
broadcast communications company; and
President of KELLEE Communications Group, a
pay telephone company.
</TABLE>
During 1996, the Board of Directors held six meetings. All of the
directors, except Mr. Lee, attended at least 75% of the Board and relevant
committee meetings during 1996. Due to illness, Mr. Lee attended 44% of such
meetings. Jill E. Barad resigned from the Board as of July 21, 1996. For
information on compensation of Directors, see "Compensation of Directors" below.
The Audit Committee, composed of Messrs. Lesser, Lee, Marcus and Quelch,
held three meetings during 1996. The Audit Committee recommends to the Board of
Directors the independent public accountants to be engaged by the Company;
reviews with such accountants and management the Company's internal accounting
procedures and controls; and reviews with such accountants the scope and results
of their audit of the consolidated financial statements of the Company.
The Compensation Committee, composed of Messrs. Nunes and Glavin,
administers the Company's stock option and compensation plans, sets compensation
for the Chief Executive Officer, reviews the compensation of the other executive
officers and provides recommendations to the Board regarding compensation
matters. The Compensation Committee held four meetings during 1996.
The Board Affairs Committee, composed of Messrs. Glavin, Jackson, Lesser
and Nunes, held three meetings during 1996. This Committee is responsible for
considering Board governance issues. The Committee also recommends individuals
to serve as directors of the Company and will consider nominees recommended by
security holders. Recommendations by security holders should be submitted in
writing to the Board Affairs Committee, in care of the President of the Company.
The Executive Committee, composed of Messrs. Fireman, Duncan and Nunes, did
not meet during 1996.
COMPENSATION OF DIRECTORS
During 1996, each director who was not an officer or employee of the
Company received $25,000 annually, plus $2,000 for each committee chairmanship
held and $2,000 for each directors' meeting and $1,000 for each committee
meeting attended, plus expenses.
The Company's Equity and Deferred Compensation Plan for Directors (the
"Directors' Plan") provides for the issuance of stock options to directors and
provides a means by which directors may defer all or a portion of their director
fees.
The deferred compensation portion of the Directors' Plan permits directors
who are not employees of the Company to defer all or a portion of their director
compensation and to invest such deferred compensation in Reebok Common Stock or
in cash which earns interest at the Merrill Lynch Corporate Bond Rate.
Compensation deferred into Reebok Common Stock is converted into stock based on
the price of the stock on the first day of the calendar quarter following the
quarter in which the fees were deferred. Dividends paid on the Reebok Common
Stock are also credited to the director's deferred compensation account.
Directors who elect to defer their compensation will receive a distribution
of their deferred compensation in either a lump sum or in annual installments
(at the director's election) beginning on a date specified by the director or on
the date on which the director is no longer a member of the Reebok Board of
Directors,
4
<PAGE> 7
whichever occurs first. If the deferred compensation is invested at the
corporate bond rate, the distribution will be in cash in an amount equal to the
deferred compensation plus interest accrued. If the compensation is deferred
into Reebok Common Stock, the distribution will be in the form of shares of
Reebok Common Stock.
Under the stock option portion of the Directors' Plan, each newly elected
Eligible Director (as defined below) who is elected to office is granted an
option on the date of such election to purchase shares of Reebok Common Stock
having an aggregate market value on such date equal to six times the average
cash compensation received by all directors in the immediately prior calendar
year. An Eligible Director is any director who is not an officer or employee of
the Company and is not a holder of more than 5% of the outstanding shares of the
Company's Common Stock or a person who is in control of such holder. After the
initial grant, on April 28 of each year, each Eligible Director is granted an
option to purchase shares of Reebok Common Stock having a fair market value on
the date of such grant equal to three times the average annual cash compensation
received by all directors in the immediately prior calendar year (or a pro rata
portion based on the date of his or her election). The exercise price for all
options granted under the Directors' Plan is the fair market value of Reebok
Common Stock on the date of the grant. Options become exercisable for one-third
of the shares covered thereby on each of the first through third anniversaries
of the grant. On April 28, 1996, Messrs. Glavin, Lee, Lesser, Marcus, Nunes, and
Quelch were granted an option to purchase 3,818 shares. Upon his election to the
Board of Directors on February 15, 1996, Mr. Jackson was granted an option to
purchase 7,978 shares.
Of the current directors, Messrs. Fireman, Duncan and Meers are not
Eligible Directors under the Directors' Plan.
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information with respect to the
shares of Common Stock owned on March 11, 1997 by persons owning of record or,
to the knowledge of the Company, beneficially 5% or more of the outstanding
shares of Common Stock. It also shows ownership by each director and nominee for
director, by each executive officer named in the Summary Compensation Table
below and by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS(2)
--- ------------ -----------
<S> <C> <C>
Paul B. Fireman(3)(9)........................................ 7,638,156 12.67%
Phyllis Fireman(4)........................................... 5,047,002 8.37%
Paul R. Duncan(9)............................................ 216,978 *
William F. Glavin(5)(9)...................................... 8,834 *
Mannie L. Jackson(5)(9)...................................... 5,067 *
Bertram M. Lee, Sr.(5)(9).................................... 16,213 *
Richard G. Lesser(6)(9)...................................... 41,692 *
William M. Marcus(7)(9)...................................... 612,373 1.02%
Angel Martinez(9)............................................ 75,871 *
Robert Meers(9).............................................. 153,040 *
Geoffrey Nunes(9)............................................ 38,186 *
John A. Quelch(5)(9)......................................... 25,917 *
Kenneth I. Watchmaker(9)..................................... 108,897 *
Directors and executive officers as a group
(16 persons)(8)(9)........................................... 9,022,592 14.96%
</TABLE>
5
<PAGE> 8
- ---------------
* Less than 1%.
(1) Except as otherwise noted, all persons and entities have sole voting and
investment power over their shares. All amounts shown in this column include
shares obtainable upon exercise of stock options exercisable within 60 days
of the date of this table.
(2) Computed on the basis of 60,307,269 shares: 56,070,845 shares outstanding
and 4,236,424 shares subject to options exercisable within 60 days of the
date of this table.
(3) Excludes 5,047,002 shares, as to which Mr. Fireman disclaims beneficial
ownership, that are beneficially owned by Phyllis Fireman, his wife.
(4) Excludes 7,638,156 shares, as to which Mrs. Fireman disclaims beneficial
ownership, that are beneficially owned by Paul Fireman, her husband.
(5) Includes for the following persons, the shares set forth below, which
represent shares deferred pursuant to the Directors' Plan: William F. Glavin
2,735 shares; Mannie L. Jackson, 1,090 shares; Bertram M. Lee, Sr., 1,627
shares; John A. Quelch, 697 shares.
(6) Excludes 3,576 shares held by Mr. Lesser's wife and child, as to which he
disclaims beneficial ownership.
(7) Excludes 29,969 shares held by Mr. Marcus' wife, as to which he disclaims
beneficial ownership.
(8) Excludes the 5,047,002 shares described in note (3) above, the 3,576 shares
described in note (6) above and the 29,969 shares described in note (7)
above. Includes shares subject to options held by directors and executive
officers that are exercisable within 60 days of the date of this table (see
note (9) below).
(9) Includes for the following persons, the shares set forth below, which shares
are subject to stock options exercisable within 60 days of the date of this
table: Paul B. Fireman, 2,500,000 shares; Paul R. Duncan, 201,000 shares;
William F. Glavin, 4,849 shares; Mannie L. Jackson, 2,977 shares; Bertram M.
Lee, Sr., 14,586 shares; Richard G. Lesser, 34,686 shares; William M.
Marcus, 21,686 shares; Angel Martinez, 75,000 shares; Robert Meers, 148,500
shares; Geoffrey Nunes, 31,686 shares; John A. Quelch, 25,020 shares;
Kenneth I. Watchmaker, 105,000 shares; and all directors and executive
officers as a group, 3,244,050 shares.
The address of Mr. and Mrs. Fireman is c/o Reebok International Ltd., 100
Technology Center Drive, Stoughton, Massachusetts 02072.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid or accrued
by the Company for services rendered during the years ended December 1994, 1995
and 1996 for the Chief Executive Officer and each of the Company's four other
most highly compensated executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------
ANNUAL COMPENSATION
----------------------------------- AWARDS
OTHER ------------------------
ANNUAL RESTRICTED ALL
NAME AND COMPEN- STOCK OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) AWARDS($) OPTIONS(#) COMPENSATION($)
- -------------------------------------- ------ ---------- ---------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul B. Fireman....................... 1996 $1,000,012 None -- None 500,000 $ 100,913(1)(2)
Chairman, President and 1995 1,000,000 None -- None 87,300 96,645(1)(2)
Chief Executive Officer 1994 1,000,012 $1,000,000 -- None None 68,786(1)(2)
Paul R. Duncan........................ 1996 546,176 None -- None 215,000 50,660(3)
Executive Vice President 1995 600,028 120,000 -- None 40,000 51,631(3)
1994 582,716 525,000 -- None None 16,412(3)
Robert Meers.......................... 1996 699,978 None -- None 250,000 41,066(4)
Executive Vice President; 1995 591,325 None -- None 140,000 31,041(4)
President and CEO, 1994 437,019 135,000 -- None None 16,412(4)
Reebok Division
Angel Martinez........................ 1996 425,022 201,354 -- None(9) 187,500 31,776(7)
Executive Vice President; President, 1995 400,010 60,000 $62,000(5) $21,483(6) 25,000 28,889(7)
The Rockport Company 1994 392,214 120,000 71,768(5) None None 16,412(7)
Kenneth I. Watchmaker................. 1996 440,387 None -- None(9) 150,000 30,750(8)
Executive Vice President and 1995 400,000 60,000 -- 21,483(6) 25,000 29,003(8)
Chief Financial Officer 1994 385,289 120,000 -- None None 16,412(8)
</TABLE>
- ---------------
(1) Includes contributions by the Company on behalf of Mr. Fireman as follows:
for 1996, $12,250 to the Company's Savings and Profit Sharing Retirement
Plan (the "Profit Sharing/Savings Plan") and $42,501 in credits allocated to
Mr. Fireman's account under the Company's Excess Benefits Plan; for 1995,
$12,120 to the Company's Profit Sharing/Savings Plan and $42,500 in credits
allocated to Mr. Fireman's account under the Company's Excess Benefits Plan;
for 1994, $16,412 to the Profit Sharing/Savings Plan. Mr. Fireman is 100%
vested in these contributions and allocations.
(2) Includes $46,162 for 1996, reflecting the present value of the economic
benefit to Mr. Fireman of the portion of the premium paid by the Company
during 1996 ($1,106,317) with respect to the split-dollar life insurance
agreement (see "Employee Agreements" below for a description of such
agreement), based on the time period between the date on which the premium
was paid by the Company and May 25, 1997 which, as of March 26, 1997 is the
earliest date on which the Company could terminate the agreement and receive
a refund, without interest, of the premium it paid. Includes $42,025 for
1995 and $52,374 for 1994, as reported in the Company's 1996 and 1995 Proxy
Statements, respectively, reflecting the present value of the economic
benefit to Mr. Fireman of the premium paid during 1995 and 1994 ($1,106,742
and $1,107,115, respectively) with respect to the same agreement, calculated
on the same basis.
(3) Includes contributions by the Company on behalf of Mr. Duncan as follows:
for 1996, $12,250 to the Profit Sharing/Savings Plan and $38,410 in credits
allocated to Mr. Duncan's account under the Excess Benefits Plan; for 1995,
$12,120 to the Profit Sharing/Savings Plan and $39,511 in credits allocated
to Mr. Duncan's account under the Excess Benefits Plan; for 1994, $16,412 to
the Profit Sharing/Savings Plan. Mr. Duncan is 100% vested in these
contributions and allocations.
(4) Includes contributions by the Company on behalf of Mr. Meers as follows: for
1996, $12,250 to the Profit Sharing/Savings Plan and $28,816 in credits
allocated to Mr. Meers' account under the Excess Benefits Plan; for 1995,
$12,120 to the Profit Sharing/Savings Plan and $18,921 in credits allocated
to Mr. Meers'
7
<PAGE> 10
account under the Excess Benefits Plan; for 1994, $16,412 to the Profit
Sharing/Savings Plan. Mr. Meers is 100% vested in these contributions and
allocations.
(5) Includes for 1995, $50,000, and for 1994, $60,000 representing compensation
attributable to Mr. Martinez as a result of a rent-free lease of a residence
to him by the Company (see "Transactions with Management and Affiliates"
below). Also includes car allowance of $12,000 for 1995 and $11,768 for
1994.
(6) Certain of the Company's executive officers were required to defer
twenty-five percent (25%) of their 1995 bonus award and to invest it into
restricted shares of Reebok Common Stock. Fifty percent (50%) of such shares
vested on January 1, 1997 and fifty percent (50%) will vest on January 1,
1998. Any unvested portion of such shares will be forfeited if the executive
officer leaves the Company prior to such vesting dates. In connection with
this arrangement, Mr. Martinez and Mr. Watchmaker were each issued 744
shares of restricted shares of Reebok Common Stock on March 15, 1996 in lieu
of $20,000 of their bonus earned for 1995. The number of shares of
restricted stock issued to them was determined by dividing $20,000 by the
average of the closing price of Reebok Common Stock for the first twenty
trading days of 1996 ($26.875). Mr. Martinez and Mr. Watchmaker are entitled
to receive dividends declared by the Company on these restricted shares.
(7) Includes contributions by the Company on behalf of Mr. Martinez as follows:
for 1996, $12,250 to the Profit Sharing/Savings Plan and $19,526 in credits
allocated to Mr. Martinez's account under the Excess Benefits Plan; for
1995, $12,120 to the Profit Sharing/Savings Plan and $16,769 in credits
allocated to Mr. Martinez's account under the Excess Benefits Plan; for
1994, $16,412 to the Profit Sharing/Savings Plan. Mr. Martinez is 100%
vested in these contributions and allocations.
(8) Includes contributions by the Company on behalf of Mr. Watchmaker as
follows: for 1996, $12,250 to the Profit Sharing/Savings Plan and $18,500 in
credits allocated to Mr. Watchmaker's account under the Excess Benefits
Plan; for 1995, $12,120 to the Profit Sharing/Savings Plan and $16,883 in
credits allocated to Mr. Watchmaker's account under the Excess Benefits
Plan; for 1994, $16,412 to the Profit Sharing/Savings Plan. Mr. Watchmaker
is 60% vested in these contributions and allocations.
(9) As of December 31, 1996, Mr. Martinez and Mr. Watchmaker each held 744
shares of restricted Common Stock granted to them on March 15, 1996 (see
note (6) above) under the 1994 Equity Incentive Plan. On December 31, 1996,
the fair market value of Mr. Martinez's restricted shares was $31,248 and of
Mr. Watchmaker's restricted shares was $31,248.
The following table sets forth information concerning individual grants of
stock options and freestanding SARs made during 1996 to the Chief Executive
Officer and each of the four other most highly compensated executive officers:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1996
--------------------------------------------------------------------------------
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
------------------------------------------------- AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION --------------------------
NAME GRANTED(#) IN 1996 ($/SH) DATE 5% 10%
---- ------------ ------------ -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Paul B. Fireman................. 111,150(2) 2.53% $27.875 2/15/06 $1,949,015 $ 4,937,839
388,850(2) 8.84% 36.00 7/26/06 8,803,564 22,308,325
Paul R. Duncan.................. 55,600(2) 1.26% 27.875 2/15/06 974,946 2,470,030
159,400(2) 3.62% 31.25 7/26/06 3,132,210 7,938,120
Angel Martinez.................. 39,350(2) .89% 27.875 2/15/06 690,002 1,748,124
148,150(2) 4.37% 31.25 7/26/06 2,911,148 7,377,870
Robert Meers.................... 100,000(2) 2.27% 27.875 2/15/06 1,753,500 4,442,500
150,000(2) 4.41% 31.25 7/26/06 2,947,500 7,470,000
Kenneth I. Watchmaker........... 41,700(2) .95% 27.875 2/15/06 731,210 1,852,523
108,300(2) 2.46% 31.25 7/26/06 2,128,095 5,393,340
</TABLE>
8
<PAGE> 11
- ---------------
(1) The assumed annual rates of stock price appreciation of 5% and 10% per annum
are established by the Securities and Exchange Commission ("SEC") and are
not to be construed as a forecast of future appreciation. The actual
realized value of such options will depend on the market value of the Common
Stock on the date of exercise; no gain will be realized by the optionees
unless there is an increase in the stock price from the price on the date of
grant.
(2) Forty percent of the shares granted on February 15, 1996 (expiring on
February 15, 2006) become exercisable on February 15, 1998 and twenty
percent of the shares become exercisable on February 15 in each of 1999,
2000 and 2001. Twenty percent of the shares granted to Messrs. Fireman,
Martinez and Watchmaker granted on July 26, 1996 (expiring on July 26, 2006)
become exercisable on December 31 in each of 1998, 1999, 2000, 2001 and
2002. Fifty percent of the shares granted to Messrs. Duncan and Meers on
July 26, 1996 (expiring July 26, 2006) become exercisable on December 31 in
each of 1998 and 1999. The number of shares subject to each option granted
on July 26, 1996 will be reduced by the number of shares which are sold or
otherwise transferred by the optionee prior to December 31, 1998 and which
were acquired after July 26, 1996 pursuant to the exercise of any options
held by him prior to such date. Options will also become exercisable upon
the death or permanent disability of the optionee or in the event of a
merger, consolidation, sale of substantially all of the Company's assets or
other transaction or series of transactions which result in a change of
control of the Company's Common Stock. Options expire ten years after the
date of grant.
The following table sets forth aggregated option exercises in 1996 and
option values as of December 31, 1996 for the Chief Executive Officer and each
of the four other most highly compensated executive officers:
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT 12/31/96(#) AT 12/31/96($)
SHARES ------------------------ -----------------------
ACQUIRED
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
Paul B. Fireman.......... None 0 2,500,000/ 587,300 $60,305,000/ 4,568,756
Paul R. Duncan........... None 0 185,000/ 265,000 4,310,775/ 2,895,150
Angel Martinez........... None 0 65,000/ 235,000 1,373,150/ 2,542,181
Robert Meers............. None 0 132,500/ 437,500 2,830,188/ 4,741,563
Kenneth I. Watchmaker.... None 0 95,000/ 205,000 1,244,875/ 2,292,113
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Board of Directors, on February 15, 1996, adopted a Supplemental
Executive Retirement Plan ("SERP") for certain key executive officers, including
all of those who are named in the Summary Compensation Table above. The SERP
provides that a participant, upon attaining age 60, will receive an annual
retirement benefit equal to (a) 25% of his or her average total compensation for
the three calendar years out of the five consecutive calendar years ending
within the year in which the participant retires ("Final Average Compensation"),
in which he or she had the highest total compensation, multiplied by (b) the
number of years of such executive's service with the Company (not to exceed 15)
divided by 15. The SERP also provides for reduced benefits for participants who
retire after age 55, but before age 60, and have completed at least five full
years of continuous service with the Company, or who retire before age 55, and
have completed at least ten full years of continuous service.
9
<PAGE> 12
The following table sets forth estimated annual benefits payable under the
SERP upon a participant's retirement, assuming attainment of age 60 while in the
employment of the Company, for the following compensation levels and years of
service:
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE --------------------------------------
COMPENSATION 5 10 15
------------ -------- -------- --------
<S> <C> <C> <C>
$ 450,000....................... $ 37,500 $ 75,000 $112,500
550,000...................... 41,667 83,333 125,000
750,000...................... 62,500 125,000 187,500
1,000,000...................... 83,333 166,667 250,000
1,250,000...................... 104,167 208,333 312,500
1,500,000...................... 125,000 250,000 375,000
1,750,000...................... 145,833 291,667 437,500
2,000,000...................... 166,667 333,333 500,000
2,250,000...................... 187,500 375,000 562,500
</TABLE>
The compensation covered by the SERP for any calendar year is the
participant's base compensation and annual incentive bonus earned for such year
(plus any amount that would have been paid to the participant but for a salary
reduction agreement in effect during such year pursuant to Sections 125 or
401(k) of the Internal Revenue Code of 1986, as amended). The benefit payment
under the SERP is not subject to any deductions for Social Security benefits or
other offset amounts. Years of service credited under the SERP for the executive
officers named in the Summary Compensation Table above are as follows: Paul B.
Fireman, 17 years, Paul R. Duncan, 11 years, Robert Meers, 12 years, Angel
Martinez, 15 years, and Kenneth I. Watchmaker, 4 years.
EMPLOYEE AGREEMENTS
Mr. Fireman has a Stock Option Agreement with the Company pursuant to which
he received in 1990 a grant of options to purchase 2.5 million shares of the
Company's Common Stock at exercise prices ranging from $17.32 to $18.37 per
share, which became exercisable in stages over a five-year period ending July
24, 1995. Options to purchase 2.5 million shares are currently exercisable
pursuant to this grant. The options will remain exercisable until July 24, 2000,
as long as (i) Mr. Fireman remains available to serve the Company as an
employee, director or consultant, and (ii) Mr. Fireman does not compete with the
Company in any manner.
The Company entered into a split-dollar insurance agreement as of September
25, 1991 with a trust established by Paul Fireman, pursuant to which the Company
and that trust will share in the premium costs of a whole life insurance policy
that pays a death benefit of not less than $50 million upon the death of Paul
Fireman, age 53 or Phyllis Fireman, age 52 (whichever occurs later). The Company
pays that portion of each annual policy premium that, in general terms, equals
the annual increase in the cash value of the policy. The Company may cause the
agreement to be terminated and the policy to be surrendered at any time upon 60
days prior notice. Upon surrender of the policy or payment of the death benefit
thereunder, the Company is entitled to repayment of an amount equal to the
cumulative premiums previously paid by the Company, with all remaining payments
to be made to the Fireman trust. See footnote (2) to the "Summary Compensation
Table" above for further information on premium payments made by the Company
under this policy.
The Company has an employment agreement with Mr. Watchmaker which
established a supplemental retirement plan for his benefit into which the
Company has credited $400,000. The terms of such supplemental retirement plan
are identical to the Reebok International Ltd. Excess Benefits Plan, except that
if Mr. Watchmaker's employment is terminated by the Company without cause, or if
his employment ceases
10
<PAGE> 13
after a change of control under the terms of his change of control agreement
with the Company (as described below), the funds credited to his supplemental
retirement plan will become vested immediately upon his termination. Mr.
Watchmaker's benefits under this supplemental retirement plan are reduced if he
returns to Ernst & Young and becomes eligible for a retirement plan there.
The Company has change of control agreements with Mr. Duncan, Mr. Martinez,
Mr. Meers and Mr. Watchmaker providing for certain compensation and benefits in
the event of the termination of their employment with the Company following a
"change in control" of the Company (as defined in the respective agreements). In
the agreements with Mr. Martinez, Mr. Meers and Mr. Watchmaker, a "change in
control" does not include one which is initiated by Company management, while in
the agreement with Mr. Duncan it does. In each agreement, if the executive's
employment with the Company were to terminate within 12 months following a
change in control either on an involuntary basis (other than as a result of
death, total disability, retirement, commission of a felony or conviction of a
crime involving moral turpitude) or, in the agreements with Mr. Martinez, Mr.
Meers and Mr. Watchmaker, in the event of a voluntary termination following a
downgrading of title, responsibilities or compensation, and in the agreement
with Mr. Duncan in the event of any voluntary termination, then the Company will
pay to the executive a lump-sum cash payment equal to four times the aggregate
of his then current annual base salary and his cash bonus for the most recent
calendar year ended before the change in control. In addition, all of the
executive's outstanding stock options, restricted shares and other incentive
rights and interests will become immediately and fully vested and exercisable.
The executive's dependents will also continue to participate fully at the
expense of the Company in all accident and health plans provided by the Company
immediately prior to the change in control, or receive substantially equivalent
coverage, for the year following his termination. In addition, the agreements
provide that the executive will be reimbursed by the Company for any legal fees
incurred by him as a result of the termination of his employment. Receipt by the
executive of the foregoing benefits is subject to his willingness to remain in
the employ of the Company or its successor for at least six months after the
change in control to assist in the transition. Mr. Duncan, Mr. Martinez, Mr.
Meers and Mr. Watchmaker are also required not to leave voluntarily the employ
of the Company in the event that any person or entity initiates a change in
control until such time as the effort terminates or the change in control is
completed.
The above description is only a summary of the agreements which the Company
has with its various executive officers and is qualified in its entirety by the
actual agreements, copies of which have been filed as Exhibits to the Company's
Annual Reports on Form 10-K.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has submitted the following report:
The Committee currently consists of Geoffrey Nunes, Chair, and William F.
Glavin. Its responsibilities include setting the compensation level for the
Chief Executive Officer and reviewing compensation levels for all other
executive officers of the Company. Compensation for these individuals is
established by the Chief Executive Officer. The Committee also functions as the
stock option committee, and in that capacity grants all stock options to
executive officers.
Reebok's Chief Executive Officer, Paul Fireman, had a base salary in 1996
of $1,000,000 and was eligible for a bonus for 1996 with a target of up to 100%
of his base salary. Mr. Fireman's salary and bonus target were established in
1990 and have not been changed since that time.
During 1996, as part of a review of Mr. Fireman's total compensation
program, the Committee reviewed comparative compensation data from a group of
other companies in the shoe and apparel industries and leading consumer products
companies assembled by an outside compensation consulting firm (this data was
also reviewed in connection with evaluating the compensation of the other
executive officers of the Company,
11
<PAGE> 14
as described below). The Committee decided to continue Mr. Fireman's base salary
at $1,000,000 per year and to establish Mr. Fireman's target bonus at 100% of
his base salary. The Committee believes that this base salary and target bonus
place Mr. Fireman's compensation at approximately the 75th percentile of
similarly situated chief executive officers, based on the survey data.
In February 1996, the Committee reviewed and adopted an Executive
Performance Incentive Plan (the "Bonus Plan") which was approved by
stockholders, and permits bonuses paid by the Company pursuant to the plan to
qualify for a tax deduction pursuant to Section 162(m) of the Internal Revenue
Code of 1986, as amended. The Bonus Plan provides for the award of bonuses to
certain executive officers and key employees of the Company and its subsidiaries
as long as certain performance criteria, established by the Committee are met.
For 1996, Mr. Fireman's bonus, as well as the bonuses of the other executive
officers of the Company, was determined in accordance with the Bonus Plan.
Specifically, the Committee established performance goals for the Company for
1996 based on three criteria: net bookings, pre-tax profit and cash flow from
operations, and determined the amount of the target award that would be paid if
the performance goals were satisfied. For 1996, participants had the ability to
earn 100% of their target award if all three performance goals were satisfied
and could earn more than 100% of the target award if all three goals were
exceeded.
In February 1997, the Committee again met to review the Company's actual
financial results for 1996 and determine whether, based on such results, any
bonus awards would be paid to the executive officers under the Bonus Plan.
Because the Company's performance did not satisfy the performance criteria set
by the Committee for payment of bonuses, no bonus was awarded to Mr. Fireman.
The Committee reviews the compensation for all executive officers other
than the Chief Executive Officer on an annual basis. As part of such review, the
Committee met in February 1996 with an outside compensation consulting firm and
reviewed comparative compensation data from a group of 23 other companies in the
shoe and apparel industries and leading consumer products companies. While
several of these companies are included in the Standard and Poor's Shoes and
Textiles Apparel Manufacturers Indices used as peer group indices in the
comparison of five year cumulative total return graph included in this Proxy
Statement, the Compensation Committee believes that the Company's most direct
competitors for executive talent are not confined to the companies that would be
included in a peer group established to compare shareholder returns. Thus, the
companies surveyed for compensation purposes were not the same as those included
in the peer group indices. Target total compensation levels for Reebok executive
officers were generally in the 75th percentile of the compensation for the
companies surveyed and the Committee determined that this was appropriate given
the complexity, volatility and risks/rewards associated with Reebok's business.
Bonuses for the executive officers for 1996 were determined in accordance
with the Company's Bonus Plan and, based on the Company's 1996 financial
results, no bonuses were paid to any executive officers, except that one
executive officer, who is responsible for a business unit which met the
performance criteria established by the Committee, received a bonus of
approximately 95% of his target award.
The Committee also grants stock options to executive officers to provide
long-term performance related incentives that link rewards directly to
shareholder gains over a multi-year period. Under the Company's current program,
the stock options vest over a five year period, 40% of which vest two years
after the grant and 20% each year thereafter. The stock options awarded to
executive officers have an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant. At its February 1996 meeting, the
Committee reviewed the Company's stock option program for 1996 and the Committee
approved stock option grants to all executive officers. The size of the 1996
grants to executive officers was determined by setting the face value of the
grant (number of shares multiplied by exercise price) at a multiple (ranging
from two and
12
<PAGE> 15
one-half to three) of the executive's base salary. In the case of Paul Fireman,
the number of options granted was based on three times his base salary.
In addition to the grants to executive officers in February 1996,
additional stock option grants were made to all executive officers in July 1996
in connection with the Company's repurchase of approximately 17 million shares
of its Common Stock pursuant to a Dutch Auction self tender offer. The Committee
determined that it was appropriate to grant additional options to the executive
officers to give them a greater ownership stake in the Company and to motivate
them through a program that would directly link their gain to the financial
success of the Company, as reflected in the market price of its Common Stock. In
determining the size of the grants, the Committee made a subjective
determination as to the appropriate shareholding for executive officers at
different levels of responsibility with the Company, reviewed the existing share
and option holdings of each executive officer and then granted options which
brought the total ownership level of each executive officer to the determined
level. The exercise price of the options granted to all executive officers other
than Paul Fireman was the fair market value of the Company's Common Stock on the
date of grant. In the case of Mr. Fireman, 388,850 shares of stock were granted
under option at an exercise price of $36.00 per share, the share price paid to
shareholders in the Dutch Auction. The options for Mr. Fireman and three of the
other executive officers vest over six and one-half years, in increments of 20%
on December 31 in 1998, 1999, 2000, 2001 and 2002. In the case of the other two
executive officers, 50% of the options vest on December 31 in 1998 and 1999. In
all cases, the option grants specify that the number of shares subject to such
options will automatically be reduced on a share-for-share basis if the option
recipient sells or otherwise transfers prior to December 31, 1998 any shares of
the Company's Common Stock acquired after the date of the grant pursuant to the
exercise of any options held by the recipient prior to such date.
In adopting and administering executive compensation plans and
arrangements, the Committee considers whether the deductibility of such
compensation will be limited under Section 162(m) of the Internal Revenue Code
of 1986, as amended, and, in appropriate cases, will attempt to structure such
compensation so that any such limitation will not apply.
Geoffrey Nunes, Chair
William F. Glavin
13
<PAGE> 16
PERFORMANCE GRAPHS
The following graph demonstrates a five-year comparison of cumulative total
returns for the Company's Common Stock, the Standard & Poor's 500 Stock Index,
and the Standard & Poor's Shoes and Textile Apparel Manufacturers Indices* from
December 31, 1991 to December 31, 1996. The graph assumes an investment of $100
on December 31, 1991 in each of the Company's Common Stock and the stocks
comprising the Standard & Poor's 500 Stock Index and the Standard & Poor's Shoes
and Textile Apparel Manufacturers Indices. Each of the indices assumes that all
dividends were reinvested.
TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
REEBOK
INTERNATIONAL
LTD. S&P 500 INDEX S&P SHOES S&P TEXTILES
<S> <C> <C> <C> <C>
DEC. 91 100 100 100 100
DEC. 92 103.69 107.62 107.90 106.45
DEC. 93 92.45 118.46 75.88 80.48
DEC. 94 122.79 120.03 102.97 78.83
DEC. 95 88.62 165.13 139.61 88.53
DEC. 96 132.69 203.05 232.07 121.63
</TABLE>
YEAR ENDING
- ---------------
* The Standard & Poor's Shoes and Textile Apparel Manufacturers Indices were
selected in order to compare the Company's performance with companies in each
of the two primary lines of business in which the Company is engaged. The
indices do not, however, include all of the Company's competitors, nor all
product categories and lines of business in which the Company is engaged.
14
<PAGE> 17
The following graph demonstrates a comparison of cumulative total returns
for the Company's Common Stock, the Standard & Poor's 500 Stock Index, and the
Standard & Poor's Shoes and Textile Apparel Manufacturers Indices from July 26,
1985, the date of the Company's initial public offering, through December 31,
1996, and was prepared in the same manner as the five-year performance graph.
This graph is included to show the Company's historical stock performance for
the entire period since the Company's stock first became publicly traded.
TOTAL SHAREHOLDER RETURN
<TABLE>
<CAPTION>
REEBOK
INTERNATIONAL
LTD. S&P 500 INDEX S&P SHOES S&P TEXTILES
<S> <C> <C> <C> <C>
26-JUL85 100 100 100 100
DEC. 86 348.43 132.91 121.99 173.32
DEC. 87 320.60 139.80 114.82 139.73
DEC. 88 377.96 163.02 182.58 158.19
DEC. 89 597.60 214.67 284.03 208.41
DEC. 90 370.08 208.00 288.90 181.28
DEC. 91 1077.51 271.38 595.38 290.74
DEC. 92 1117.30 292.05 642.40 309.48
DEC. 93 996.17 321.49 451.73 234.00
DEC. 94 1323.07 325.75 613.01 229.18
DEC. 95 954.93 448.14 831.16 257.39
DEC. 96 1429.80 551.04 1381.59 353.63
</TABLE>
YEAR ENDING
TRANSACTIONS WITH MANAGEMENT AND AFFILIATES
In connection with his relocation from California, the Company leases a
house in Massachusetts to Angel Martinez, an Executive Vice President of the
Company. Mr. Martinez has agreed to purchase the residence from the Company and
the purchase will occur as soon as certain closing conditions are satisfied.
Initially, the purchase price agreed upon was equal to the amount paid by the
Company for the house, including certain renovations, plus the depreciated value
of certain furnishings and closing costs paid by the Company. The Company,
however, reduced the actual purchase price by approximately $185,000 to take
into account the loss Mr. Martinez incurred on the sale of his California
residence. When the residence was first leased to him, Mr. Martinez was not
required to pay rent to the Company while bearing the carrying costs of his
California residence. Beginning November 1, 1995, Mr. Martinez became liable for
rent at a rate of $5,000 per month. Mr. Martinez will pay the full accrued
amount of such rent to the Company at the time he purchases the Massachusetts
residence from the Company.
In April 1996, the Company entered into a three-year sponsorship agreement
with Harlem Globetrotters International, Inc. (the "Globetrotters") under which
Reebok is the exclusive athletic footwear and apparel sponsor of the
Globetrotters and will supply Reebok products having an aggregate retail value
not to exceed $140,000 to the Globetrotters each contract year. Under the
agreement, Reebok has also been granted a license to produce and sell Reebok
products bearing the Globetrotter's team trademark for a royalty payment of 5%
of Reebok's production cost, with guaranteed royalty payments of $100,000 for
the first contract year
15
<PAGE> 18
and $200,000 for the remaining two contract years. During 1996, Reebok paid to
the Globetrotters $100,000 representing the minimum guaranteed royalty payment
for the first contract year. Mannie L. Jackson, a director of the Company, is
the Chairman, Chief Executive Officer and majority owner of the Globetrotters.
APPROVAL OF AMENDMENT TO THE 1994 EQUITY INCENTIVE PLAN
On February 25, 1997, the Board of Directors unanimously approved an
amendment to the 1994 Equity Incentive Plan (the "Equity Plan") to increase the
number of shares authorized for grants of awards under the Equity Plan by
2,500,000 shares, raising the total number of shares authorized for issuance
under the Plan to 9,500,000 shares. Originally, 5,000,000 shares were authorized
for issuance under the Equity Plan. In July 1996, the Board of Directors
approved an increase of 2,000,000 shares authorized for issuance under the Plan
in order to continue to provide a sufficient number of shares for the grant of
awards under the Plan to non-officers of the Company, following a reduction in
the number of shares remaining authorized for issuance under the Equity Plan
resulting from a special grant of options to purchase an aggregate of 1,234,000
shares to certain of the Company's key executives as an incentive in connection
with the Company's "Dutch Auction" self tender offer. As permitted under the
Equity Plan, no shareholder approval was required for such increase. As of March
11, 1997, there were only 934,123 shares available for granting of awards under
the Equity Plan. The Company is thus seeking to increase by 2,500,000 the number
of shares authorized for grants of awards in order to permit the continued
granting of awards under the Equity Plan.
The purpose of the Equity Plan is to advance the interests of the Company
and its subsidiaries by enhancing the Company's ability to (i) attract and
retain employees and other persons or entities who are in a position to make
significant contributions; (ii) reward such persons for such contributions; and
(iii) encourage such persons or entities to take into account the long-term
interest of the Company through ownership of, or an interest in, shares of the
Company's Common Stock. The Plan became effective on May 3, 1994 and will
terminate on May 2, 2004. Employees of the Company and its subsidiaries and
other persons or entities who are in a position to make significant
contributions to the Company and its subsidiaries are eligible to participate in
the Equity Plan, except that non-employee Directors are not eligible to
participate in the Plan. It is not possible at this time to determine the
approximate number of persons or entities who may be selected to receive future
grants of awards under the Equity Plan or the number of awards to any person or
entity.
The Equity Plan is administered by the Compensation Committee, the members
of which are all outside independent directors who are not eligible to
participate in the Plan. Subject to the terms of the Equity Plan, the Committee
is authorized to select recipients of awards, determine the size and type of
awards to be made and determine the terms and conditions on which awards are
made. Under the Equity Plan, the Committee is authorized to make awards in any
calendar year of up to 250,000 shares of Common Stock to any participant other
than the Chief Executive Officer and/or the President of the Company and up to
500,000 shares of Common Stock to the Chief Executive Officer and/or the
President of the Company. The maximum amount of compensation other than Common
Stock that may be awarded in any calendar year to any participant under the
Equity Plan is $2,000,000.
The following is a brief description of certain other material features of
the Equity Plan:
Options. The Equity Plan provides for the grant of options to purchase
shares of Reebok Common Stock which are intended to qualify as "incentive stock
options" under the Internal Revenue Code of 1986, as amended (the "Code"), as
well as "non-qualified" options which are not intended to so qualify.
The exercise price of any stock option granted under the Equity Plan may
not be less than the fair market value of Reebok Common Stock on the date of the
grant except in the case of grants to participants who are not executive
officers of the Company and in certain limited circumstances involving
amendments to
16
<PAGE> 19
outstanding options and options granted in acquisitions or other extraordinary
transactions. In the case of "incentive stock options," the exercise price may
not be less than 110% of such fair market value with respect to any such option
granted to a participant who owns 10% or more of the outstanding Common Stock.
As of March 11, 1997, the market value of a share of Reebok Common Stock was
$49.875. The period within which each such option may be exercised cannot exceed
ten years from the date of grant. Options are exercisable in full or in
installments as provided by the terms of each option as determined by the
Compensation Committee. Payment of the exercise price of any option must be made
in full at the time of exercise. Such payment must be in cash or in such other
form as the Compensation Committee may approve.
Stock Appreciation Rights. The Equity Plan permits the issuance of stock
appreciation rights ("SARs"), which are rights entitling the recipient to
receive payment, in cash and/or stock, based on the appreciation in value of the
Company's Common Stock. Generally, an SAR entitles the recipient to receive, for
each share for which it is exercised, the amount by which the fair market value
of a share of Common Stock on the date of exercise exceeds the fair market value
of a share on the date the SAR was granted. However, the Compensation Committee
may also grant SARs which provide that the amount a recipient is entitled to
receive will be adjusted upward or downward under the terms established by the
Compensation Committee to take into account the performance of the Company's
Common Stock in comparison with the performance of other stocks or any index or
indices of other stocks.
SARs may be granted in tandem with, or independently of, stock options
granted under the Equity Plan. If an SAR is granted in tandem with a stock
option, it will be exercisable only at such times, and to the extent, that the
related stock option is exercisable. An SAR granted independently of stock
options will be exercisable at such times and on such conditions as the
Compensation Committee may specify.
Restricted Stock. The Equity Plan permits the grant of awards of
restricted stock which entitle the recipient to acquire shares of Reebok Common
Stock, subject to certain restrictions or conditions, for no cash consideration
or for such consideration as the Compensation Committee may determine.
Generally, awards of restricted stock are subject to restrictions on transfer
and subject to forfeiture unless specified conditions are met, such as
continuous service with the Company, achievement of business objectives and/or
achievement of individual, unit or Company goals.
Deferred Stock. The Equity Plan also permits the grant of awards of
deferred stock, which entitle the recipient to receive shares of Reebok Common
Stock to be delivered in the future. Delivery of such shares of deferred stock
will take place at such time or times, and on such conditions, as the
Compensation Committee may determine.
General Provisions Applicable to All Awards. No awards made under the
Equity Plan may be assigned, pledged or transferred by a recipient other than by
will or by the laws of descent and distribution.
The Compensation Committee is required to make appropriate adjustments to
outstanding awards to reflect stock dividends, stock splits and similar events.
In the event of a merger, consolidation, any sale of substantially all of the
Company's assets or other transaction or series of related transactions as a
result of which a single person or several persons acting in concert own a
majority of the Company's Common Stock (except for certain transactions that do
not involve a change in the holders of a majority of the outstanding shares of
Common Stock and the ownership of more than half of the outstanding shares of
Common Stock by a single person), all outstanding options and SARs will become
exercisable and each outstanding restricted stock and deferred stock award will
become free of all restrictions and conditions or, in lieu thereof, the
Compensation Committee in its discretion may, by the vote of a majority of the
members thereof who are Continuing Directors (as defined in the Equity Plan),
provide for replacement awards.
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The Compensation Committee may at any time discontinue granting awards
under the Equity Plan. The Board of Directors may amend, suspend or terminate
the Equity Plan, provided that no such action will be made without the approval
of the shareholders of the Company, if such approval is required by Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Board of Directors may increase the number of shares authorized for issuance
under the Plan to non-officers of the Company without obtaining shareholder
approval, although any increase in shares to be used for grants to officers
requires shareholder approval.
FEDERAL TAX EFFECTS WITH RESPECT TO OPTIONS:
Incentive Options. No taxable income is realized by the optionee upon the
grant or exercise of an incentive stock option under the Equity Plan. If the
optionee does not dispose of the shares issued pursuant to the exercise of an
incentive stock option within two years from the date of grant or within one
year after the transfer of such shares to the optionee, then (a) upon sale of
such shares, any amount realized in excess of the option price (the amount paid
for the shares) will be taxed to the optionee as a long-term capital gain and
any loss sustained will be a long-term capital loss and (b) no deduction will be
allowed to the Company for federal income tax purposes. The exercise of
incentive stock options may result in alternative minimum tax liability for the
optionee.
If shares of Common Stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition") generally (a)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of the shares at
exercise (or, if less, the amount realized on a sale of such shares) over the
option price thereof, and (b) the Company will be entitled to deduct such
amount. Any further gain realized will be taxed as short-term or long-term
capital gain and will not result in any deduction by the Company. Special rules
apply where all or a portion of the exercise price of the incentive stock option
is paid by tendering shares of Common Stock. A disqualifying disposition in the
year of exercise will eliminate the alternative minimum tax effect of the
incentive stock option.
Non-qualified Options. With respect to non-qualified options under the
Equity Plan, no income is realized by the optionee at the time the option is
granted. Generally, (a) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and the fair
market value of the shares on the date of exercise, and the Company receives a
tax deduction for the same amount and (b) at disposition, appreciation or
depreciation after the date of exercise is treated as either short-term or
long-term capital gain or loss depending on how long the shares have been held.
Under Section 162(m) of the Code, the Company would be unable in certain
circumstances to claim a deduction upon the exercise of options granted to its
top five executive officers under the Equity Plan unless shareholder approval of
this amendment to the Plan is obtained.
SHAREHOLDER APPROVAL OF AMENDMENT TO EQUITY PLAN:
The maximum number of shares of Common Stock that currently may be issued
under the Equity Plan is 7 million (of which 2 million shares may be used for
grants only to non-officers of the Company and of which no more than 1 million
shares of Common Stock may be issued pursuant to the exercise of stock options
that qualify as "incentive stock options" under the provisions of Section 422A
of the Code). As of March 11, 1997, there were 934,123 shares available for
future grants of options under the Equity Plan. Unless the number of shares
reserved for issuance pursuant to options granted under the Equity Plan is
increased, there will not be sufficient shares reserved for issuance under the
Plan to permit the continued granting of awards. An affirmative vote of a
majority of the shares present, in person or by proxy, and entitled to vote at
the Annual Meeting is required to approve the amendment to the Equity Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 2.
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SHAREHOLDER PROPOSAL
The following proposal was submitted by the California Public Employees'
Retirement System (CalPERS), a shareholder of the Company. CalPERS has informed
the Company that its address is P.O. Box 942708, Sacramento, California
94229-2708 and that it is the owner of approximately 599,000 shares of the
Company's Common Stock.
"RESOLVED, that the stockholders of Reebok International Ltd. recommend
that the board of directors take the necessary steps, in compliance with
applicable law, to reorganize itself into one class. The reorganization shall be
done in a manner that does not affect the unexpired terms of directors
previously elected.
Supporting Statement
Is accountability by the board of directors important to shareholders? As a
trust fund with more than 1 million participants, and as the owner of
approximately 599,000 shares of the Company's common stock, the California
Public Employees' Retirement System (CalPERS) thinks accountability is of
paramount importance. This is why we are sponsoring this proposal which, if
passed, would urge the board to reorganize itself so that each director stands
before the shareholders for re-election each year. We hope to eliminate the
Company's, so-called "classified board", whereby the directors are divided into
three classes, each serving a three-year term. Under the current structure,
shareholders can only vote on one-third of the board at any given time.
By classifying itself, a board insulates its members from immediate
challenge. Insularity may have made sense in the past (e.g., during the takeover
frenzy of the 1980s). But now, we believe that insularity works primarily to
hamper accountability. A classified board can prevent shareholders from mounting
a successful opposition to the entire board, because only a third of the
directors are up for election in any given year. By way of contrast, a
declassified board would stand for election in its entirety, every year.
CalPERS believes that corporate governance procedures and practices, and
the level of management accountability they impose, are closely related to
financial performance. It is intuitive that, when directors are accountable for
their actions, they perform better.
We -- as one shareholder -- are dissatisfied with the Company's long-term
financial performance. We seek to improve that performance through this
structural reorganization of the board. If the board acts on our proposal,
shareholders would have the opportunity to register their views at each annual
meeting -- on performance of the board as a whole, and of each director as an
individual.
CalPERS urges you to join us in VOTING TO DE-STAGGER the terms of election,
as a powerful tool for management incentive and accountability. We urge your
support FOR this proposal."
STATEMENT OF BOARD OF DIRECTORS RECOMMENDING A VOTE AGAINST THIS STOCKHOLDER
PROPOSAL
The Board believes that the present system of electing directors of the
Company in three classes is in the best interests of the Company and its
stockholders and should not be changed.
A classified board offers important advantages to stockholders and is the
preferred method of governance for the majority of Fortune 500 companies.
Moreover, Massachusetts law, under which the Company is incorporated, requires
all publicly-held corporations to have a classified board, unless the company
affirmatively exempts itself from such requirement. The legislative history
surrounding enaction of this law shows a decided preference for classified
boards in the interest of public policy.
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<PAGE> 22
The Board believes that a classified board enhances continuity and
stability in the Company's management and policies since a majority of the
directors at any given time will have had prior experience and familiarity with
the business of the Company. This continuity and stability facilitates more
effective long-term planning and is integral to increasing the Company's value
to stockholders. Moreover, such continuity helps the Company attract and retain
qualified individuals willing to commit the time and dedication necessary to
understand the Company, its operations and competitive environment.
The Board is committed to corporate accountability and does not accept the
proposition that a classified board insulates directors from responsibility. A
classified board permits stockholders to annually change one-third of the
directors and thereby substantially change the Board's composition and
character. Corporate accountability depends on the selection of responsible and
experienced individuals, not on whether they serve terms of one year or three.
Additionally, a classified board protects shareholders against potentially
coercive takeover tactics, whereby a party attempts to acquire control on terms
that do not offer the greatest value to all stockholders. Because a classified
board prevents the immediate removal of directors, any person seeking to acquire
control of the Company is encouraged to negotiate with the Board. This ensures
the Board sufficient time to develop and consider appropriate strategy and
enhances its ability to negotiate the best result for all stockholders.
The Company understands that the Board should be responsive to shareholders
and has taken steps to assure corporate accountability through such measures as
maintaining a majority of outside directors (seven of ten); and having only
outside directors on the Audit Committee, the Compensation Committee, and the
Board Affairs Committee, which has responsibility for corporate governance
issues.
Finally, shareholders should be aware that adoption of this stockholder
proposal would not eliminate board classification and institute the annual
election of directors, but would constitute merely a recommendation by the
stockholders that the Board consider enacting such a change. The affirmative
vote of two-thirds of the outstanding shares or a vote of the directors is
required to opt out of the Massachusetts law and declassify the Board.
For the reasons outlined above, the Board has concluded that a classified
board is in the best interests of the Company and its shareholders and thus is
opposed to CalPERS' shareholder proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
AGAINST THIS PROPOSAL.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership with the SEC and the New York Stock Exchange.
Executive officers and directors are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, all required Section 16(a) filings were made.
AUDIT MATTERS
Ernst & Young LLP has been selected to audit the consolidated financial
statements of the Company for the year ended December 31, 1997, and to report
the results of their audit to the Audit Committee of the Board of Directors.
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<PAGE> 23
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will be afforded the opportunity to make a statement if he
desires to do so and to respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS
Proposals of shareholders submitted for consideration at the Annual Meeting
of Shareholders in 1998 must be received by the Company no later than November
30, 1997.
OTHER BUSINESS
The Board of Directors knows of no business that will come before the
meeting for action except as described in the accompanying Notice of Meeting.
However, as to any such business, the persons designated as proxies will have
discretionary authority to act in their best judgment.
FORM 10-K
A COPY OF REEBOK'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE BY WRITING TO: OFFICE OF
INVESTOR RELATIONS, REEBOK INTERNATIONAL LTD., 100 TECHNOLOGY CENTER DRIVE,
STOUGHTON, MASSACHUSETTS 02072.
March 26, 1997
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<PAGE> 24
PROXY
ANNUAL MEETING OF REEBOK INTERNATIONAL LTD.
May 1, 1997
The undersigned hereby constitutes and appoints KENNETH WATCHMAKER and
BARRY NAGLER, or either one of them with power of substitution to each, proxies
to vote and act at the Annual Meeting of Shareholders to be held at The First
National Bank of Boston, First Floor Auditorium, 100 Federal Street, Boston,
Massachusetts on May 1, 1997 at 10:00 a.m., and at any adjournments thereof,
upon and with respect to the number of shares of Common Stock of the Company as
to which the undersigned may be entitled to vote or act. The undersigned
instructs such proxies, or their substitutes, to vote in such manner as they may
determine on any matters which may come before the meeting, all as indicated in
the accompanying Notice of Meeting and Proxy Statement, receipt of which is
acknowledged, and to vote on the following as specified by the undersigned. All
proxies heretofore given by the undersigned in respect of said meeting are
hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless
otherwise specified in the boxes provided on the reverse side hereof, this proxy
will be voted IN FAVOR of all nominees for director, FOR proposal 2, AGAINST
proposal 3 and in the discretion of the named proxies as to any other matter
that may come before the meeting or any adjournments thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
[X] Please mark
votes as in
this example.
PLEASE DO NOT FOLD THIS PROXY
1. Election of Class I Directors
The undersigned hereby GRANTS authority to elect as Class I directors the
following nominees:
Nominees: Mannie L. Jackson, Geoffrey Nunes
FOR WITHHELD
[ ] [ ]
<PAGE> 25
[ ] ------------------------------------------
For all nominees except as noted above
2. To approve an amendment to the 1994 Equity Incentive Plan to increase the
number of shares of Common Stock authorized for issuance by 2,500,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Shareholder proposal to reorganize the Board of Directors into one class.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE [ ]
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as your name(s) appear hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please sign your full title as
such. Each joint owner should sign.
Signature: _____________________________ Date _________________
Signature: ______________________________ Date _________________
