SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report October 7, 1998
REEBOK INTERNATIONAL LTD.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Massachusetts 1-9340 04-2678061
_______________________________________________________________
State of incorporation (Commission (IRS Employer
or organization) File Number) Identification No.)
100 Technology Center Drive, Stoughton, MA 02072
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (781) 401-5000
_________________________________________________________________
N/A
(Former name or former address, if changed since last
report)
PAGE
<PAGE>
ITEM 5. OTHER EVENTS
Stock Option Exchange and Restructuring Program ("Program")
On October 6, 1998, the Compensation Committee of the Board
of Directors of Reebok International Ltd. (the "Company")
approved a Program intended both to provide certain employees
with a more meaningful equity-based incentive arrangement and to
reduce the number of existing stock options outstanding. This
Program will allow current employees of the Company that hold
stock options pursuant to the Company's employee stock option
plans, if they choose, to exchange their existing options for new
options, with a new vesting schedule, for a smaller number of
shares priced at the current market price. None of the senior
officers of the Company who are also directors, including Paul
Fireman, nor any of the other directors of the Company, will be
eligible to participate in the Program.
As a result of Reebok's stock price being down significantly
- -- due in large part to unfavorable industry conditions, as well
as the recent downturn in the stock market generally -- most of
Reebok's employee stock options are underwater. This has left
the Company without an effective equity-based incentive program.
The Company's stock option program is intended to provide an
incentive for participants to drive results, as well as to
operate as a retention vehicle, encouraging valued employees to
stay and vest in their options over time. With the significant
decrease in Reebok's stock price, these objectives are not being
met.
The Company has therefore decided to adopt its stock option
exchange and restructuring program as a means of restoring the
incentive and retention objectives of its stock option plan. In
developing the Program, the Company balanced the interests of
shareholders with the very real business need to retain valuable
employees and provide them with proper incentives to succeed.
The Company believes that the Program has been structured
responsibly by offering employees the opportunity to trade in
their options which are at above-market exercise prices for a
smaller number of options at the current market price subject to
a new four-year vesting schedule. Many of the options exchanged
may be fully exercisable or may become exercisable shortly.
Of the 9,932,000 shares outstanding under the Company's
stock option programs on October 6, 1998, only approximately 3.9
million option shares (or approximately 40%) are eligible for
this Program. Substantially all of the other outstanding options
are at exercise prices that are above market, but are held by
directors of the Company including Paul Fireman and certain other
senior officers who are not participating in the Program. If all
eligible employee option holders participate in this Program, the
result will be a reduction of approximately 8% in the total
number of shares covered by options. The Program will be offered
to eligible employee option holders on October 7, 1998, and those
employees will have until October 16, 1998 to decide whether to
participate.
The number of existing employee option shares to be
exchanged for the new option shares will be at the ratio of
1.25:1. This ratio was selected based on recommendations
received by the Company from an outside compensation consulting
firm. In order to promote the Company's retention goals, the new
stock options to be received by employees will have new vesting
terms, even though many of the existing options to be exchanged
by employees have already vested and are currently exercisable.
The new options to be received will have a four-year vesting
schedule, under which 25% of the shares granted pursuant to the
option will vest at the end of each year.
The Company believes that this Program is necessary to
retain key employees of the Company and to provide them with an
appropriate incentive to improve and grow the Company's business,
and is thus in the interest of all shareholders.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly
authorized.
REEBOK INTERNATIONAL LTD.
(Registrant)
By: /s/ KENNETH WATCHMAKER
Kenneth Watchmaker
Executive Vice President
and Chief Financial Officer
DATED: October 7, 1998
