<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 5, 1998
Notice is hereby given that the Annual Meeting of Shareholders of Reebok
International Ltd. will be held at BankBoston, Long Lane Conference Room, Second
Floor, 100 Federal Street, Boston, Massachusetts at 10:00 a.m. local time on
Tuesday, May 5, 1998 for the following purposes:
1. To elect four Class II members of the Board of Directors.
2. 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, 1998 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 27, 1998
<PAGE> 3
ANNUAL MEETING OF SHAREHOLDERS
MAY 5, 1998
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 5, 1998 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. 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, 1998 are
entitled to notice of and to vote at the Meeting. There were 56,374,938 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 four nominees for director who receive the greatest
number of votes properly cast (or a plurality of the votes) will be elected
directors. Votes cast by proxy or in person at the Meeting will be counted by
persons selected by the Company to act as election inspectors for the Meeting.
The election inspectors 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 Meeting. Such proxies
therefore will have no effect on the outcome of voting with respect to the
election of directors at the Meeting.
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 and in the discretion of the named proxies as to any
other matter that may come before the Meeting or any adjournments of the
Meeting.
The Annual Report to Shareholders for Reebok's fiscal year ended December
31, 1997 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
bylaws of the Company, the Board of Directors may determine the total number of
directors and the number of directors to be elected at any Annual Meeting of
Shareholders or Special Meeting in lieu thereof. The Board of Directors has
fixed at twelve the total number of directors and has fixed at four the number
of directors to be elected at the 1998 Annual Meeting. Of the current directors,
five Class II directors have terms expiring at the 1998 Annual Meeting, three
Class III directors have terms expiring at the 1999 Annual Meeting and two Class
I directors have terms expiring at the 2000 Annual Meeting. Four of the five
directors whose terms expire at the 1998 Annual Meeting have been nominated by
the Board of Directors for reelection at such Meeting. In accordance with the
Term Limits Policy of the Board of Directors, Mr. Marcus is retiring from the
Board having served four full terms as a director. Each Class II director
elected at the 1998 Annual Meeting will serve until the 2001 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 II directors, to hold office until the
Annual Meeting of Shareholders in 2001 or Special Meeting in lieu thereof, and
until their respective successors are elected and qualified, the four 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 II 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 II director, with information
showing the business experience and current public directorships, if any, of
each, the age of each and the year each was first elected a director of the
Company.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
<S> <C> <C> <C>
Paul R. Duncan....................... Executive Vice President of the Company 57 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.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
<S> <C> <C> <C>
M. Katherine Dwyer................... President of Revlon Consumer Products USA, a 49 1998
division of Revlon, Inc. ("Revlon"), a
cosmetics company, (since January 1998);
President of Revlon Cosmetics USA (from
November 1995 to January 1998); Senior Vice
President of Revlon and of Revlon Consumer
Products Corporation ("Products
Corporation"), (since December 1996); prior
to that served in various executive
positions for Products Corporation,
including General Manager of the Cosmetics
Unit from November 1995 to December 1996 and
Executive Vice President of Marketing of the
Mass Cosmetics Unit from June 1993 to
November 1995; Vice President, Marketing of
Clairol Inc., a cosmetics company, (from
1991 to 1993); Director of WestPoint Stevens
Inc., a bed and bath home fashions and
knitted fabrics company.
William F. Glavin.................... President Emeritus, Babson College; Director 65 1994
of INCO 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, Chief Operating 63 1988
Officer and Director 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; Director of A.C. Moore Arts &
Crafts, Inc., an operator of arts and crafts
stores.
</TABLE>
In accordance with the Term Limits Policy of the Board of Directors,
William M. Marcus, age 60, who has been a director of the Company since 1981 and
who presently serves as a Class II member of the Board of Directors, is retiring
from the Board having served four full terms as a director.
3
<PAGE> 6
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 54 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 54 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).
Bertram M. Lee, Sr................... Chairman of the Board of BML Associates 59 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>
On February 24, 1998, Thomas M. Ryan, age 45, was elected by the Board of
Directors to serve as a Class III member of the Board of Directors, effective
April 1, 1998. Mr. Ryan is Vice Chairman and Chief Operating Officer and
Director of CVS Corporation, a company in the chain drug store industry.
Class I members of the Board of Directors having terms of office expiring
at the 2000 Annual Meeting of Shareholders are as follows:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE AND DIRECTOR
NAME CURRENT DIRECTORSHIPS AGE SINCE
---- ----------------------- --- --------
<S> <C> <C> <C>
Mannie L. Jackson.................... Chairman, Chief Executive Officer and 58 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....................... Retired Senior Vice President and General 67 1986
Counsel, Millipore Corporation, a leader in
the field of separation technology.
</TABLE>
During 1997, the Board of Directors held five meetings. All of the
directors who were on the Board in 1997 attended at least 75% of the Board and
relevant committee meetings during 1997. For information on compensation of
Directors, see "Compensation of Directors" below.
4
<PAGE> 7
The Audit Committee which was composed of Messrs. Lesser, Lee and Marcus in
1997, held three meetings during 1997. Effective February 24, 1998, upon her
election to the Board of Directors, Ms. Dwyer was appointed to the Audit
Committee. 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 in 1997 was composed of Messrs. Nunes and
Glavin. Effective February 24, 1998, upon her election to the Board of
Directors, Ms. Dwyer was appointed to the Compensation Committee. The
Compensation Committee administers the Company's stock option and compensation
plans, sets compensation for the Chief Executive Officer, reviews the
compensation of the other executive officers and provides recommendations to the
Board regarding compensation matters. The Compensation Committee held three
meetings during 1997.
The Board Affairs Committee, composed of Messrs. Glavin, Jackson, Lesser
and Nunes, held three meetings during 1997. 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 1997.
COMPENSATION OF DIRECTORS
During 1997, 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. Beginning in 1998, as a part of a new policy
adopted by the Board of Directors that requires each director to own Reebok
Common Stock with a market value of at least four times the amount of the annual
retainer within five years from the date of the director's first election to the
Board, a minimum of forty percent of the annual retainer will be paid to the
directors in Reebok Common Stock.
The Company's Equity and Deferred Compensation Plan for Directors (the
"Directors' Plan") provides for the issuance of stock options to directors and
provides a means by which directors may defer all or a portion of their director
fees.
The deferred compensation portion of the Directors' Plan permits directors
who are not employees of the Company to defer all or a portion of their director
compensation and to invest such deferred compensation in Reebok 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, 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) is granted an option on the date of such
election to purchase shares of Reebok Common Stock having
5
<PAGE> 8
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, 1997, Messrs. Glavin, Jackson, Lee, Lesser, Marcus
and Nunes were each granted an option to purchase 3,189 shares. Ms. Dwyer was
granted an option to purchase 8,033 shares on February 24, 1998, the effective
date of her election to the Board of Directors.
Of the current directors, Messrs. Fireman, Duncan and Meers are not
Eligible Directors under the Directors' Plan.
BENEFICIAL OWNERSHIP OF SHARES
The following table shows certain information about the shares of Common
Stock owned on March 11, 1998 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)...................................... 7,717,536 12.56%
Phyllis Fireman(4).......................................... 5,047,002 8.21%
Roger Best(9)............................................... 55,240 *
Paul R. Duncan(9)........................................... 252,771 *
M. Katherine Dwyer.......................................... None 0
William F. Glavin(5)(9)..................................... 14,069 *
Mannie L. Jackson(5)(9)..................................... 10,073 *
Bertram M. Lee, Sr.(5)(9)................................... 20,239 *
Richard G. Lesser(6)(9)..................................... 45,235 *
William M. Marcus(5)(7)(9).................................. 606,862 *
Angel Martinez(9)........................................... 107,861 *
Robert Meers(9)............................................. 265,360 *
Geoffrey Nunes(9)........................................... 37,729 *
Kenneth I. Watchmaker(9).................................... 156,147 *
Directors and executive officers as a group (17
persons)(8)(9)............................................ 9,345,686 15.21%
</TABLE>
- ---------------
* 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.
6
<PAGE> 9
(2) Computed on the basis of 61,448,426 shares: 56,374,938 shares outstanding
and 5,073,488 shares subject to options exercisable within 60 days of the
date of this table.
(3) Excludes 5,047,002 shares that are beneficially owned by Phyllis Fireman,
Paul Fireman's wife. Mr. Fireman disclaims beneficial ownership of these
shares.
(4) Excludes 7,717,536 shares that are beneficially owned by Paul Fireman,
Phyllis Fireman's husband. Mrs. Fireman disclaims beneficial ownership of
these shares.
(5) Includes for the following persons, the following shares, which represent
shares deferred pursuant to the Directors' Plan: William F. Glavin 3,844
shares; Mannie L. Jackson, 2,056 shares; Bertram M. Lee, Sr., 2,110 shares;
William M. Marcus, 946 shares.
(6) Excludes 3,576 shares held by Mr. Lesser's wife and child. Mr. Lesser
disclaims beneficial ownership of these shares.
(7) Excludes 29,969 shares held by Mr. Marcus' wife. Mr. Marcus disclaims
beneficial ownership of these shares.
(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 following shares which are subject
to stock options exercisable within 60 days of the date of this table: Paul
B. Fireman, 2,579,380 shares; Roger Best, 54,670 shares; Paul R. Duncan,
236,240 shares; William F. Glavin, 8,975 shares; Mannie L. Jackson, 7,017
shares; Bertram M. Lee, Sr., 18,129 shares; Richard G. Lesser, 38,229
shares; William M. Marcus, 25,229 shares; Angel Martinez, 106,990 shares;
Robert Meers, 260,250 shares; Geoffrey Nunes, 31,229 shares; Kenneth I.
Watchmaker, 151,680 shares; and all directors and executive officers as a
group, 3,572,948 shares.
The address of Mr. and Mrs. Fireman is c/o Reebok International Ltd., 100
Technology Center Drive, Stoughton, Massachusetts 02072.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table shows the aggregate compensation paid or accrued by the
Company for services rendered during the years ended December 1995, 1996 and
1997 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....................... 1997 $1,038,474 $ 562,500 -- None 111,150 $ 54,112(1)(2)
Chairman, President and 1996 1,000,012 None -- None 500,000 100,913(1)(2)
Chief Executive Officer 1995 1,000,000 None -- None 87,300 96,645(1)(2)
Robert Meers.......................... 1997 769,227 365,625 -- None 35,000 39,749(3)
Executive Vice President; 1996 699,978 None -- None 250,000 41,066(3)
President and CEO, 1995 591,325 None -- None 140,000 31,041(3)
Reebok Division
Angel Martinez........................ 1997 467,328 325,078 -- None(5) None 29,001(7)
Executive Vice President; 1996 425,022 201,354 -- None 187,500 31,776(7)
President and CEO, 1995 400,010 60,000 $62,000(4) $21,483(6) 25,000 28,889(7)
The Rockport Company
Kenneth I. Watchmaker................. 1997 509,600 281,250 -- None(5) None 29,769(8)
Executive Vice President and 1996 440,387 None -- None 150,000 30,750(8)
Chief Financial Officer 1995 400,000 60,000 -- 21,483(6) 25,000 29,003(8)
Roger Best............................ 1997 379,972(9) 85,000 -- None None 17,875(10)
Senior Vice President 1996 344,515(9) 100,000 -- None 220,550 17,883(10)
of the Reebok Division 1995 195,000(9) 75,075(9) -- None 6,950 30,389(10)
</TABLE>
- ---------------
(1) Includes contributions by the Company on behalf of Mr. Fireman as follows:
for 1997, $12,250 to the Company's Savings and Profit Sharing Retirement
Plan (the "Profit Sharing/Savings Plan") and $41,095 in credits allocated
to Mr. Fireman's account under the Company's Excess Benefits Plan; for
1996, $12,250 to the Company's 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. Mr. Fireman is 100% vested in these
contributions and allocations.
(2) Includes $767 for 1997, reflecting the present value of the economic
benefit to Mr. Fireman of the premium paid by the Company during 1997
($19,245) with respect to the split-dollar life insurance agreement (see
"Employee Agreements" below for a description of such agreement), based on
the time period between the date on which the premium was paid by the
Company and May 26, 1998 which, as of March 27, 1998 is the earliest date
on which the Company could terminate the agreement and receive a refund,
without interest, of the premium it paid. Under the split-dollar life
insurance agreement, the Company was obligated to pay the premium for the
split-dollar policy for only six years, ending in 1996, and therefore in
1997, the Company paid only the premium on a related "key man" policy of
which the Company is the beneficiary, resulting in the substantial
reduction in the total premium payment. Includes $46,162 for 1996 and
$42,025 for 1995, as reported in the Company's 1997 and 1996 Proxy
Statements, respectively, reflecting the present value of the economic
benefit to Mr. Fireman of the premium paid during 1996 and 1995 ($1,106,317
and $1,106,742, respectively) with respect to the same agreement,
calculated on the same basis.
8
<PAGE> 11
(3) Includes contributions by the Company on behalf of Mr. Meers as follows:
for 1997, $12,250 to the Profit Sharing/Savings Plan and $27,499 in credits
allocated to Mr. Meers' account under the Excess Benefits Plan; 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' account under the Excess Benefits Plan. Mr. Meers is 100% vested in
these contributions and allocations.
(4) Includes for 1995, $50,000, 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.
(5) As of December 31, 1997, Mr. Martinez and Mr. Watchmaker each held 372
shares of restricted Common Stock granted to them on March 15, 1996 under
the 1994 Equity Incentive Plan (see note (6) below). On December 31, 1997,
the fair market value of Mr. Martinez's restricted shares was $10,718.25
and of Mr. Watchmaker's restricted shares was $10,718.25.
(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%) vested on January
1, 1998. 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 1997, $12,250 to the Profit Sharing/Savings Plan and $16,751 in credits
allocated to Mr. Martinez's account under the Excess Benefits Plan; 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. Mr.
Martinez is 100% vested in these contributions and allocations.
(8) Includes contributions by the Company on behalf of Mr. Watchmaker as
follows: for 1997, $12,250 to the Profit Sharing/Savings Plan and $17,519
in credits allocated to Mr. Watchmaker's account under the Excess Benefits
Plan; 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. Mr. Watchmaker is 80% vested in these contributions and allocations.
(9) Certain amounts of Mr. Best's compensation for 1997 (L21,667), 1996
(L20,833) and 1995 (L125,000 salary and L48,125 bonus) have been converted
from pounds sterling to U.S. dollars using a conversion rate for December
31 of each such year.
(10) Includes contributions by the Company on behalf of Mr. Best as follows: for
1997, $12,250 to the Profit Sharing/Savings Plan and $5,625 in credits
allocated to Mr. Best's account under the Excess Benefits Plan; for 1996,
$12,250 to the Profit Sharing/Savings Plan and $5,633 (L3,333) to Mr.
Best's U.K. pension scheme; for 1995, $30,389 (L19,480) to Mr. Best's U.K.
pension scheme. Mr. Best is 100% vested in the contributions and
allocations to the Profit Sharing/Savings Plan and Excess Benefits Plan.
Certain amounts for 1996 and 1995 as specified above have been converted
from pounds sterling to U.S. dollars using a conversion rate for December
31 of each such year.
9
<PAGE> 12
The following table shows information concerning individual grants of stock
options and freestanding SARs made during 1997 to the Chief Executive Officer
and each of the four other most highly compensated executive officers:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1997
--------------------------------------------------------------------------------
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
---------------------------------------------------- AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(#) IN 1997 ($/SH) DATE 5% 10%
---- ------------ ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul B. Fireman.................. 111,150(2) 9.22% $ 41.00 1/8/07 $2,865,447 $7,262,541
Angel Martinez................... None -- -- -- -- --
Robert Meers..................... 35,000(2) 2.90% 41.00 1/8/07 902,300 2,286,900
Kenneth I. Watchmaker............ None -- -- -- -- --
Roger Best....................... None -- -- -- -- --
</TABLE>
- ---------------
(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) Twenty percent of the shares granted to Mr. Fireman on January 8, 1997
(expiring on January 8, 2007) become exercisable on December 31 in each of
1998, 1999, 2000, 2001 and 2002. Fifty percent of the shares granted to Mr.
Meers on January 8, 1997 (expiring January 8, 2007) become exercisable on
December 31 in each of 1998 and 1999. The number of shares subject to the
options granted to Mr. Fireman and Mr. Meers on January 8, 1997 will be
reduced (to the extent that no reduction is made in the total number of
shares granted to them under their July 26, 1996 option grants) 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.
10
<PAGE> 13
The following table sets forth aggregated option exercises in 1997 and
option values as of December 31, 1997 for the Chief Executive Officer and each
of the four other most highly compensated executive officers:
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND OPTION/SAR VALUES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT 12/31/97(#) AT 12/31/97($)
ACQUIRED -------------------------- -------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------- ----------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul B. Fireman............. None 0 2,534,920/ 663,530 $27,336,250/ 104,203
Angel Martinez.............. None 0 86,250/ 213,750 584,869/ 36,891
Robert Meers................ None 0 212,250/ 392,750 1,115,422/ 125,391
Kenneth I. Watchmaker....... None 0 130,000/ 170,000 24,900/ 39,094
Roger Best.................. None 0 54,670/ 195,330 67,813/ 92,813
</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
Mr. Fireman, Mr. Meers, Mr. Martinez and Mr. Watchmaker. The SERP provides that
a participant, upon attaining age 60, will receive an annual retirement benefit
equal to (a) twenty-five percent (25%) of his or her average total compensation
for the three calendar years out of the five consecutive calendar years ending
within the year in which the participant retires ("Final Average Compensation"),
in which he or she had the highest total compensation (except that, for one
executive officer who has transitioned to a part-time schedule, the three
calendar years have been defined as those falling between 1993 and 1997)
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.
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
11
<PAGE> 14
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
who are participants in the SERP are as follows: Paul B. Fireman, 18 years,
Robert Meers, 13 years, Angel Martinez, 16 years, and Kenneth I. Watchmaker, 5
years. Mr. Best does not participate in the SERP.
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 54 or Phyllis Fireman, age 53 (whichever occurs later). Under the
agreement, the Company paid that portion of each annual policy premium that, in
general terms, was equal to the annual increase in the cash value of the policy.
The Company's obligation to make such premium payments terminated in 1996 upon
the payment of the sixth annual premium due under the policy. The Company
continues to pay the premium on a related "key man" policy of which the Company
is the beneficiary and which is designed to work in conjunction with the
split-dollar insurance policy to insure the repayment to the Company of the
aggregate amount of the premiums paid by the Company. The Company may cause the
agreement to be terminated and the policy to be surrendered at any time upon 60
days' prior notice. Upon surrender of the policy or payment of the death benefit
under the policy, the Company is entitled to repayment of an amount equal to the
cumulative premiums previously paid by the Company, with all remaining payments
to be made to the 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 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.
Two of the Company's subsidiaries have employment agreements dated
September 11, 1997 with Mr. Best under which he serves as Senior Vice President
Europe of the Company's U.K. subsidiary and as Managing Director of the
Company's Netherlands subsidiary, and which provide for the continuation of
certain terms and conditions contained in Mr. Best's employment agreement with
the Company dated April 17, 1996. The agreements provide for an initial
aggregate annual base salary of L260,000 pounds sterling (one-half to be paid by
each subsidiary), subject to review annually, and under which Mr. Best is
entitled to receive an annual bonus under the subsidiaries' bonus schemes, with
a target bonus of 50% of base salary. Mr. Best is entitled to a pension
allowance of 16% of his total compensation (base salary and bonuses, if any),
12
<PAGE> 15
which is paid directly into to Mr. Best's U.K. pension scheme. Both agreements
provide that the subsidiaries or Mr. Best may terminate the agreement for any
reason upon twelve months' notice. In addition, the agreements may be terminated
by the Company's subsidiaries immediately for justified cause defined in the
agreement as, among other matters, to be serious or repeated misconduct or
breaches of the agreement or conviction of a felony or a misdemeanor involving
moral turpitude. If the Netherlands subsidiary terminates Mr. Best's employment
(other than for justified cause), in lieu of twelve months' notice, Mr. Best
would be entitled to twelve months' gross salary and allowances. The agreements
contain non-competition provisions under which Mr. Best agrees that for a period
of one year following termination of his employment, he will not (i) in the case
of the U.K. agreement, accept any position with any organization which competes
with the Company anywhere in the world where Reebok products are sold and (ii)
in the case of the Netherlands agreement, engage in or have an interest in,
directly or indirectly, the Company's competitors specifically listed in the
agreement. Mr. Best's agreements also contain a change of control provision
under which, in the event that a change of control of the Company is initiated,
he agrees to continue to render employment services until the change of control
has occurred (or efforts to effect the change of control have terminated) after
which, for a period of twelve months, he has the right to terminate his
employment upon one month's notice and would be entitled to receive his base
salary and an amount approximating his average bonus for the balance of his
employment term. A "change of control" does not include a change resulting from
a leveraged buy-out or recapitalization of the Company or similar transaction in
which Mr. Best or Paul Fireman or three or more executive officers of the
Company participate as equity investors, with an aggregate direct or indirect
interest of at least 5%.
The Company has change of control agreements with 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). A "change in
control" includes one which is initiated by Company management except in the
case of a leveraged buy-out or recapitalization of the Company in which the
executive participates as an equity investor. In each agreement, if the
executive's employment with the Company were to terminate (other than as a
result of the death, total disability or retirement of the executive at or after
his normal retirement date) within 24 months following a change in control and
the termination is (a) by the Company for a reason other than as a result of a
conviction of the executive for a felony or a crime involving moral turpitude or
(b) by the executive if the Company fails to maintain the executive in the
positions, with the titles, that he held immediately prior to the change of
control, following a downgrading of his responsibilities or authority or if the
Company makes certain other changes or reductions in the executive's
compensation as specified in the agreement, then the Company will pay to the
executive a lump-sum cash payment equal to 300% of the aggregate of his (i)
then-current annual base salary, (ii) his target bonus for the then-current
year, or, if higher, his bonus for the most recent calendar year ended before
the change of control, (iii) the amount of his then-current annual automobile
allowance and (iv) the annual cost of life insurance then furnished to him by
the Company. In addition, all of the executive's outstanding stock options,
restricted shares and other similar incentive rights and interests will become
immediately and fully vested and exercisable. The executive will be treated for
purposes of the Company's Supplemental Executive Retirement Plan ("SERP") as
having three additional years of continuous service and the Company will pay to
him in a single lump-sum cash payment the present value of his benefit under the
SERP. The Company will pay to the executive, in a single lump-sum cash payment,
an amount equal to the difference, if any, between (i) the total distribution
that he receives following his termination under the Company's Profit-Sharing
and Retirement Plan and its Excess Benefits Plan and (ii) the total distribution
that he would have received under such plans had he accumulated three additional
years of service for vesting prior to termination. The executive and his
dependents will also continue to participate fully at the expense of the Company
in all accident and health plans provided by the Company immediately prior to
the change in control, or receive substantially equivalent coverage, until the
third
13
<PAGE> 16
anniversary of his termination of employment. In addition, the agreements
provide that the executive will be reimbursed by the Company for any legal fees
and expenses incurred by him as a result of the termination of his employment.
The agreements provide that if it is determined that any payment or benefit
provided by the Company to or on behalf of the executive, either under the
executive's change of control agreement or otherwise, is subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code, the Company will make
an additional lump-sum payment to the executive which will be sufficient to make
the executive whole for all taxes and any associated interest and penalties
imposed under or as a result of Section 4999. Mr. Martinez, Mr. Meers and Mr.
Watchmaker are required under the agreements not to leave voluntarily the employ
of the Company in the event that any person or entity initiates a change in
control until such time as the effort terminates or the change in control is
completed.
The Company has non-competition agreements with Mr. Martinez, Mr. Meers and
Mr. Watchmaker under which each executive agrees not to compete, directly or
indirectly, with the Company during his employment and pursuant to which the
Company has the right to extend the non-competition requirement for a period of
up to one year after his termination of employment with the Company (the
"Non-Competition Period"). During the Non-Competition Period, the Company will
pay the executive an amount equal to one-half of his base salary as in effect on
his termination date and will continue certain medical coverage benefits, except
that, if the Company terminates the executive's employment without "cause" (as
defined in the agreement), the executive would be entitled to 100% of his base
salary as of the date of his termination.
The above description is only a summary of the agreements which the Company
has with its various executive officers and is qualified in its entirety by the
actual agreements, copies of which have been filed as Exhibits to the Company's
Annual Report on Form 10-K.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has submitted the following report:
The Committee in 1997 consisted of Geoffrey Nunes, Chair and William F.
Glavin. M. Katherine Dwyer became a member of the Compensation Committee on
February 24, 1998, the date she joined the Board. She did not, however,
participate in any of the discussions or decisions regarding executive officer
compensation for 1997. The Compensation Committee's 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 other 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.
During 1997, 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, as described below). The Committee decided to
continue Mr. Fireman's base salary at $1,000,000 per year for 1997 and to
establish Mr. Fireman's target bonus at 100% of his base salary. Mr. Fireman's
salary and bonus target were established in 1990 and have not been changed since
that time. 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 1997, the Committee established financial criteria for the
executive officers of the Company for 1997 under the Company's Executive
Performance Incentive Plan (the "Bonus Plan"). The Bonus Plan permits bonuses to
be paid only if the financial criteria established by the Committee are met.
Thus, bonuses paid under the Bonus Plan qualify for a tax deduction pursuant to
Section 162(m) of the Internal Revenue Code of 1986, as amended. For 1997 the
financial criteria were based on three factors: net bookings, pre-tax
14
<PAGE> 17
profit and cash flow from operations. The Committee also determined in February
1997 the amount of the target award that would be paid if the financial criteria
were satisfied. For 1997, participants had the ability to earn 100% of their
target award if all three financial criteria were satisfied and could earn more
than 100% of the target award if all three criteria were exceeded. Target awards
were fixed as a percentage of base salary and ranged from 40% to 100%. The 1997
bonus for Mr. Fireman was determined in accordance with this Bonus Plan.
In February 1998, the Committee met to review the Company's actual
financial results for 1997 and determine whether such results satisfied the
financial criteria established under the Bonus Plan. For the Reebok Global and
Corporate groups, (a) the pre-tax profit goal was not met for 1997, (b) the
Company exceeded the net bookings goal for the first half of the year, but did
not meet the net bookings goal for the second half of the year, and (c) the
Company exceeded the cash flow target for the full year. Based on these
financial results, the Bonus Plan provided for funding of 75% of the target
bonuses (the "Bonus Funding Amount") for executive officers in the Reebok Global
and Corporate groups. The actual bonuses paid to executive officers in such
groups were then determined by an individual assessment of each executive
officer's performance in 1997 and whether such executive officer had met his
individual performance objectives for the year. Based on such assessment, a
decision was then made as to the percentage of the Bonus Funding Amount each
executive should receive. In the case of Mr. Fireman, the Committee determined
that, based on its assessment of his performance in 1997 and the fact that one
of his four individual performance objectives had not been satisfied, Mr.
Fireman should receive 75% of the 75% Bonus Funding Amount or 56.25% of his
target bonus of $1,000,000. Accordingly, Mr. Fireman was awarded a bonus of
$562,500 for 1997.
The Committee reviews the compensation for all other executive officers on
an annual basis. As part of such review, the Committee met in February 1997 and
reviewed comparative compensation data from a group of 11 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 1997 were determined in accordance
with the Company's Bonus Plan and the Company's actual 1997 financial results.
As indicated above, the Bonus Plan provided for funding of 75% of the target
bonuses for the executive officers in the Reebok Global and Corporate groups,
based on the satisfaction of certain of the financial criteria set by the
Committee for 1997. In determining the actual bonuses to be paid for executive
officers in such groups, an assessment was then made as to the individual
performance of each such executive officer for 1997 and whether such executive
officer had met his individual performance objectives for the year. Based on
such assessment, a decision was made as to the percentage of the Bonus Funding
Amount that would be paid to each executive officer. In the case of executive
officers responsible for The Rockport Company and the Reebok Division's
International Operations, an initial determination was made under the Bonus Plan
as to whether such business units had satisfied their financial goals for 1997
and, based on the actual financial performance of such business units, a
determination was made as to what percentage of the target bonuses would be
funded. An assessment was then made of the individual performance of each
executive and whether such executive had met his individual performance
15
<PAGE> 18
objectives for 1997, and based on such assessment, a decision was made as to the
percentage of the Bonus Funding Amount that would be awarded to each particular
executive.
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 for officers of the Company generally 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.
In January 1997, the Committee made an option grant of 111,150 shares of
stock to Paul Fireman and a stock option grant to another executive officer.
These grants were designed to address the fact that, because of certain
restrictions under the Company's Equity Incentive Plan, the Committee could not
grant these two executives the full amount of options that they had intended to
grant them in July 1996 in connection with the Company's Dutch Auction self
tender offer. The exercise price of these options were at fair market value on
the date of grant. The grant to Mr. Fireman vests in increments of 20% on
December 31 in 1998, 1999, 2000, 2001 and 2002. In the case of the other
executive, the grant vests 50% on December 31, 1998 and 50% on December 31,
1999. In both 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 addition to these grants, additional stock option grants were made in
1997 to two executive officers who joined the Company and one executive officer
who was promoted. The size of these grants were subjectively determined by the
Committee based on what it determined was an appropriate shareholding for an
executive in such position, taking into account both internal equity, as well as
comparative data. In December 1997, annual stock option grants were made under
the Company's stock option program to those executive officers of the Company
who did not participate in the substantial option grants made in July 1996 in
connection with the Dutch Auction. In determining the size of these grants, the
Committee made a subjective determination as to the appropriate level of grant
for the executive officers based on their position and level of responsibility
within the Company, taking into account both internal equity, as well as
comparative data.
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
16
<PAGE> 19
PERFORMANCE GRAPHS
The following graph shows a five-year comparison of cumulative total
returns for the Company's Common Stock, the Standard & Poor's 500 Stock Index,
and the Standard & Poor's Shoes and Textile Apparel Manufacturers Indices* from
December 31, 1992 to December 31, 1997. The graph assumes an investment of $100
on December 31, 1992 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 RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
REEBOK TEXTILES
MEASUREMENT PERIOD INTERNATIONAL FOOTWEAR- S&P 500 (APPAREL)-
(FISCAL YEAR COVERED) LTD. 500 INDEX 500
<S> <C> <C> <C> <C>
DEC92 100 100 100 100
DEC93 89.16 70.33 110.08 75.61
DEC94 118.42 95.43 111.53 74.05
DEC95 85.47 129.39 153.45 83.17
DEC96 127.97 215.08 188.68 114.26
DEC97 87.79 144.95 251.63 123.22
</TABLE>
YEARS 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.
17
<PAGE> 20
The following graph shows 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, 1997, 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 RETURNS
(DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
REEBOK TEXTILES
MEASUREMENT PERIOD INTERNATIONAL S&P 500 FOOTWEAR- (APPAREL)-
(FISCAL YEAR COVERED) LTD. INDEX 500 500
<S> <C> <C> <C> <C>
26-JUL-85 100.00 100.00 100.00 100.00
DEC-85 139.14 112.05 112.27 120.88
DEC-86 348.43 132.97 121.99 173.32
DEC-87 320.60 139.80 114.87 139.73
DEC-88 377.96 163.02 162.58 158.19
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-93 996.17 321.49 451.73 234.03
DEC-94 1323.07 325.74 613.01 229.16
DEC-95 954.93 448.14 831.16 257.39
DEC-96 1429.60 561.01 1381.59 353.63
DEC-97 980.64 734.88 931.08 351.36
</TABLE>
YEARS ENDING
TRANSACTIONS WITH MANAGEMENT AND AFFILIATES
On March 26, 1997, Angel Martinez, an Executive Vice President of the
Company, purchased for $892,926 the Massachusetts residence which had been
leased to him by the Company in connection with his relocation from California.
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. However, beginning November 1, 1995, Mr. Martinez became
liable for rent at a rate of $5,000 per month. The full accrued amount of such
rent was paid by him to the Company when he purchased the residence from the
Company.
In April 1996, the Company entered into a three-year agreement with Harlem
Globetrotters International, Inc. (the "Globetrotters") under which Reebok is
the exclusive athletic footwear and apparel sponsor of the Globetrotters and
supplies 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
18
<PAGE> 21
production cost, with guaranteed royalty payments of $100,000 for the first
contract year and $200,000 for the remaining two contract years. During 1997,
Reebok paid to the Globetrotters $200,000 representing the minimum guaranteed
royalty payment for the second contract year. Mannie L. Jackson, a director of
the Company, is the Chairman, Chief Executive Officer and majority owner of the
Globetrotters.
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, 1998, and to report
the results of their audit to the Audit Committee of the Board of Directors.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will be available to respond to appropriate questions from
shareholders.
ADVANCE NOTICE PROCEDURES
On February 24, 1998, the Company's Board of Directors approved an
amendment to the bylaws providing for certain advance notice procedures. As a
result, under the Company's bylaws, nominations for director may be made only
(a) by or at the direction of the Board of Directors or an appropriate committee
of the Board of Directors or (b) by any stockholder of record who is entitled to
vote for the election of directors at the meeting who has delivered notice to
the principal executive offices of the Company (containing certain information
specified in the bylaws) (i) not less than 75 nor more than 120 days prior to
the first anniversary date of the preceding year's annual meeting or (ii) if the
meeting is called for a date which is more than 75 days prior to such
anniversary date, not later than the close of business on the 10th day following
the date notice of such meeting is mailed or made public, whichever is earlier.
The bylaws also provide that no business may be brought before an annual
meeting except as specified in the notice of the meeting or as otherwise brought
before the meeting (a) by or at the direction of the Board of Directors, (b) by
the presiding officer, or (c) by a stockholder entitled to vote at such annual
meeting who has delivered notice to the principal executive offices of the
Company (containing certain information specified in the bylaws) (i) not less
than 75 nor more than 120 days prior to the first anniversary of the preceding
year's annual meeting, or (ii) if the meeting is called for a date which is more
than 75 days prior to such anniversary date, not later than the close of
business on the 10th day following the date notice of such meeting is mailed or
made public, whichever is earlier. These requirements apply to any matter that a
stockholder wishes to raise at an annual meeting other than those stockholder
proposals included in the Company's proxy materials in accordance with the
procedures under Rule 14a-8 of the Securities Exchange Act of 1934, as amended.
A copy of the full text of the bylaws provisions discussed above may be
obtained by writing to the Clerk of the Company at 100 Technology Center Drive,
Stoughton, Massachusetts 02072 and is filed with the
19
<PAGE> 22
Securities and Exchange Commission as an exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.
SHAREHOLDER PROPOSALS
Proposals of shareholders submitted for consideration at the Annual Meeting
of Shareholders in 1999 must be received by the Company no later than November
30, 1998.
OTHER BUSINESS
The Board of Directors knows of no business that will properly come before
the meeting for action except as described in the accompanying Notice of
Meeting. However, as to any such business which properly comes before the
Meeting, the persons designated as proxies will have discretionary authority to
act in their best judgment.
FORM 10-K
A COPY OF REEBOK'S ANNUAL REPORT ON FORM 10-K 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 27, 1998
20
<PAGE> 23
0417-PS-98
<PAGE> 24
PROXY
ANNUAL MEETING OF REEBOK INTERNATIONAL LTD.
May 5, 1998
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 BankBoston,
Long Lane Conference Room, Second Floor, 100 Federal Street, Boston,
Massachusetts on May 5, 1998 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 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
<PAGE> 25
[X] Please mark
votes as in
this example.
PLEASE DO NOT FOLD THIS PROXY
1. Election of Class II Directors
The undersigned hereby GRANTS authority to elect as Class II directors the
following nominees:
Nominees: Paul R. Duncan, M. Katherine Dwyer,
William F. Glavin, Richard G. Lesser
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] ___________________________________________
For all nominees except as noted above
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 ___________________
