<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
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))
THE TIMBERLAND COMPANY
(Name of Registrant as Specified In Its Charter)
M
(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
THE TIMBERLAND COMPANY
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
March 30, 1998
TO THE STOCKHOLDERS:
The Board of Directors and Officers of The Timberland Company invite you to
attend the 1998 Annual Meeting of Stockholders to be held on Thursday, May 21,
1998, at 9:30 a.m. at the Company's headquarters located at 200 Domain Drive,
Stratham, New Hampshire.
A copy of the Proxy Statement and the proxy are enclosed.
IF YOU CANNOT BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE.
Cordially,
/s/ Sidney W. Swartz
SIDNEY W. SWARTZ
Chairman, President and Chief
Executive Officer
<PAGE> 3
THE TIMBERLAND COMPANY
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
The 1998 Annual Meeting of Stockholders (the "Annual Meeting") of The
Timberland Company (the "Company") will be held on Thursday, May 21, 1998, at
9:30 a.m. at the Company's headquarters located at 200 Domain Drive, Stratham,
New Hampshire, for the following purposes:
1. To fix the number of directors at seven for the coming year,
subject to further action by the Board of Directors as provided in the
Company's By-Laws, and to elect seven directors to hold office until their
successors shall have been duly elected and qualified; and
2. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Two of the directors will be elected by the holders of Class A Common Stock
voting separately as a class. The remaining five directors will be elected by
the holders of Class A Common Stock and the holders of Class B Common Stock
voting together as a single class.
The Board of Directors has fixed the close of business on Tuesday, March
24, 1998, as the record date for the determination of stockholders entitled to
notice of and to vote and act at the Annual Meeting. Only stockholders of record
at the close of business on that date are entitled to notice of and to vote and
act at the Annual Meeting.
By Order of the Board of Directors,
/s/ John E. Beard
JOHN E. BEARD
Secretary
March 30, 1998
<PAGE> 4
THE TIMBERLAND COMPANY
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
PROXY STATEMENT
MARCH 30, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by the Board of Directors of The Timberland
Company, a Delaware corporation ("Timberland" or the "Company"), for use in
connection with the 1998 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 21, 1998, and any adjourned sessions
thereof. The complete mailing address of the executive offices of the Company is
200 Domain Drive, Stratham, New Hampshire 03885, and the Company's telephone
number is (603) 772-9500. The matters to be acted upon at the Annual Meeting are
stated in the accompanying Notice of Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record as of the close of business on March 24, 1998
are entitled to vote at the Annual Meeting and any adjournments thereof. As of
March 3, 1998, 9,047,096 shares of the Company's Class A Common Stock, $.01 par
value ("Class A Common Stock"), and 2,338,162 shares of the Company's Class B
Common Stock, $.01 par value ("Class B Common Stock"), were outstanding.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitation of proxies by mail or telegram, proxies may be
solicited personally or by telephone by directors, officers and employees of the
Company, none of whom will be specially compensated for such solicitation. The
expected date of the first mailing of this Proxy Statement and the enclosed
proxy is March 30, 1998.
If the enclosed proxy is properly signed and returned and not revoked, the
shares represented thereby will be voted at the Annual Meeting. If the
stockholder specifies in the proxy how the shares are to be voted, they will be
voted accordingly. If the stockholder does not specify how the shares are to be
voted, then they will be voted to fix the number of directors at seven and to
elect the seven nominees named in this Proxy Statement. Should any person named
as a nominee for director be unable to serve as a director, the persons
appointed as proxy for the Annual Meeting may, in their discretion, vote for
such other person as director, or may vote to fix the number of directors at
such number less than seven, as the Board of Directors may recommend. The
Company has no reason to believe that any of the nominees will be unavailable
for election. Any stockholder has the right to revoke such stockholder's proxy
at any time before it is voted by attending the Annual Meeting and voting in
person, by filing with the Secretary of the Company an instrument in writing
revoking the proxy or by delivering to the Secretary a newly executed proxy
bearing a later date.
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any additional matters should properly come before the Annual
Meeting, it is the intention of the persons appointed as proxy to vote on such
matters in accordance with their judgment.
QUORUM, REQUIRED VOTES AND METHOD OF TABULATION
Consistent with Delaware law and under the Company's By-Laws, a majority of
the voting power of shares entitled to be cast on a particular matter, whether
present in person or represented by proxy, constitutes
<PAGE> 5
a quorum as to such matter. Votes cast by proxy or in person at the Annual
Meeting will be counted by persons appointed by the Company to act as election
inspectors for the Annual Meeting.
Each share of Class A Common Stock entitles the holder of record thereof to
one vote, and each share of Class B Common Stock entitles the holder of record
thereof to ten votes. The holders of Class A Common Stock will vote separately
as a class with respect to the election of two nominees, John F. Brennan and
Abraham Zaleznik. The holders of Class A Common Stock and the holders of Class B
Common Stock will vote together as a single class with respect to the election
of Sidney W. Swartz, Jeffrey B. Swartz, Robert M. Agate, Ian W. Diery and John
A. Fitzsimmons, and on any other matters to be voted on at the Annual Meeting.
The seven nominees for election as directors who receive the greatest
number of votes properly cast for the election of directors at the Annual
Meeting shall be elected. Shares represented by proxies that withhold authority
to vote for a nominee for director or indicate an abstention or a "broker
non-vote" (i.e., shares represented at the Annual Meeting held by brokers or
shareholder nominees as to which (i) instructions have not been received from
the beneficial owners thereof or persons entitled to vote such shares and (ii)
the broker or nominee does not have the discretionary voting power on a
particular matter with respect to such shares) will count as shares present and
entitled to be cast for purposes of determining the presence of a quorum.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP has been selected as the Company's independent
accountants 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 Deloitte &
Touche LLP is expected to be present at the Annual Meeting. Such representative
will have the opportunity to make a statement if he or she desires and will be
available to respond to appropriate questions.
ITEM 1. ELECTION OF DIRECTORS
The directors are elected at each Annual Meeting of Stockholders to serve
for the ensuing year and until their respective successors have been duly
elected and qualified. The By-Laws of the Company specify that the number of
directors of the Company may be determined by the Board of Directors or by the
stockholders. Proxies, unless marked to the contrary, will be voted at the
Annual Meeting to fix the number of directors at seven and to elect the seven
nominees named in this Proxy Statement. The number of directors fixed at the
Annual Meeting is subject to later increase by action of the stockholders or by
a majority of the members of the Board of Directors. Any vacancy arising on the
Board of Directors may be filled by the stockholders or by a majority of the
members of the Board of Directors.
The current Board of Directors consists of seven members, all of whom were
elected directors at the 1997 Annual Meeting of Stockholders held on May 16,
1997. Mr. Brennan and Dr. Zaleznik were elected by the holders of Class A Common
Stock voting separately as a class, and Messrs. Sidney Swartz, Jeffrey Swartz,
Agate, Diery and Fitzsimmons were elected by the holders of Class A Common Stock
and the holders of Class B Common Stock voting together as a single class.
2
<PAGE> 6
INFORMATION WITH RESPECT TO NOMINEES
The names, ages, principal occupations for at least the last five years and
certain other information with respect to the nominees for election are as
follows:
<TABLE>
<CAPTION>
NAME AND YEAR BUSINESS EXPERIENCE AND
FIRST ELECTED DIRECTOR AGE DIRECTORSHIPS OF OTHER PUBLIC COMPANIES
---------------------- --- ---------------------------------------
<S> <C> <C>
Sidney W. Swartz (1978)................ 62 Since June 1986, Mr. Sidney Swartz has served the
Company as Chairman of the Board, Chief Executive
Officer and President.
Jeffrey B. Swartz (1990)............... 38 Since May 1991, Mr. Jeffrey Swartz has served the
Company as Chief Operating Officer and, since March
1990, as Executive Vice President. He is also a
director of Central Tractor Farm & Country, Inc.
Jeffrey Swartz is the son of Sidney Swartz.
Robert M. Agate (1992)................. 62 From January 1992 until his retirement in July 1996,
Mr. Agate served as Senior Executive Vice President
and Chief Financial Officer of Colgate-Palmolive
Company.
John F. Brennan (1987)................. 65 Since August 1991, Mr. Brennan has served as Dean of
the Sawyer School of Management of Suffolk University.
Mr. Brennan is also a director of Aerovox Incorporated
and Data Storage Corporation.
Ian W. Diery (1996).................... 48 Since November 1997, Mr. Diery has served as the
President and Chief Executive Officer of Electronic
Scrip, Inc. From September 1996 to November 1997, Mr.
Diery was a self-employed consultant. From November
1995 to August 1996, Mr. Diery served as President and
Chief Executive Officer and as a Director of AST
Research, Inc. Prior to joining AST Research, Inc.,
Mr. Diery served at Apple Computer in a variety of
positions, including: Executive Vice President and
General Manager of the Personal Computer Division from
July 1993 to April 1995; Executive Vice President of
Worldwide Sales and Marketing from July 1992 to July
1993; and Senior Vice President and President of Apple
Pacific Division from October 1989 to July 1992.
John A. Fitzsimmons (1996)............. 55 Since January 1987, Mr. Fitzsimmons has served as
Senior Vice President -- Consumer Electronics of
Circuit City Stores, Inc.
Abraham Zaleznik (1987)................ 74 Since 1990, Dr. Zaleznik has served as Professor
Emeritus of Harvard University and as a self-employed
consultant. Dr. Zaleznik is also a director of Ogden
Corporation.
</TABLE>
3
<PAGE> 7
COMMITTEES OF THE BOARD OF DIRECTORS
Dr. Zaleznik and Mr. Diery are the members of the Compensation Committee of
the Board of Directors (the "Compensation Committee"). The Compensation
Committee's responsibilities include: determining and presenting to the Board of
Directors for its ratification the compensation of the Chief Executive Officer
and the Chief Operating Officer; determining the compensation of the executive
officers who report directly to the Chief Operating Officer; reviewing the
compensation determined by management for all other executive officers of the
Company; and oversight of the administration of the Company's stock option and
other benefit plans.
Messrs. Agate, Brennan and Fitzsimmons are the members of the Company's
Audit Committee, whose functions include: recommending to the Board of Directors
the appointment of the Company's independent accountants; reviewing the
independence of the accountants; meeting with the accountants to review the
Company's financial statements; and reviewing the Company's accounting
procedures and internal controls.
The Company does not have a nominating or similar committee.
During 1997, the Board of Directors held six meetings, the Compensation
Committee held three meetings, and the Audit Committee held two meetings. Each
nominee attended more than 75% of the meetings of the Board of Directors and all
of the meetings of committees on which he served.
DIRECTORS' COMPENSATION
The Company compensates each director who is not an officer of the Company
in cash as follows: (i) an annual retainer of $25,000; (ii) a fee of $1,000 for
each meeting of the Board of Directors attended; and (iii) a fee of $500 for
each meeting of a committee of the Board of Directors attended. In addition, any
non-officer director who serves as a committee chairman receives an annual
retainer of $2,500.
The Timberland Company 1991 Stock Option Plan for Non-Employee Directors
provides for an initial option grant to each newly elected, eligible director,
on the date of initial election, to purchase up to 5,000 shares of Class A
Common Stock, at a price equal to the fair market value on the date of grant.
Thereafter, for each additional full year of service, option grants to purchase
up to 1,250 shares of Class A Common Stock are made on the anniversary of the
initial grant to each eligible director, at a price equal to the fair market
value on the date of grant. Accordingly, on May 16, 1997, Messrs. Diery and
Fitzsimmons, on May 20, 1997, Mr. Brennan and Dr. Zaleznik, and on November 12,
1997, Mr. Agate, were each granted options to purchase up to 1,250 shares of
Class A Common Stock, at a price equal to the fair market value of such shares
on the respective grant dates. For so long as the holder remains a director of
the Company, options granted under the 1991 Stock Option Plan for Non-Employee
Directors are exercisable at a rate of 25% of the total underlying shares on
each of the first four anniversaries of the date of grant, and expire ten years
from the date of grant.
Information as to ownership of Company securities by nominees for director
is included under the heading, "Security Ownership of Certain Beneficial Owners
and Management."
4
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to compensation
awarded to, earned by or paid to the Chief Executive Officer and the four other
most highly compensated executive officers of the Company who served as such at
December 31, 1997 (hereinafter all the foregoing persons are together referred
to as the "Named Executive Officers"), for the fiscal years ended December 31,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- --------------------------
(A) (B) (C) (D) (E) (H)
OTHER (G) (I)
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION(1)($) OPTIONS(2)(#) PAYOUTS($) SATION(3)($)
--------------------------- ---- --------- -------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sidney W. Swartz(4).......... 1997 489,996 1,231,565 79,968 -- -- 4,470
Chairman, President and 1996 464,362 483,718 -- -- -- 3,698
Chief Executive Officer 1995 450,502 -- -- -- -- 3,540
---- ------- --------- ------- ------ -- -----
Jeffrey B. Swartz............ 1997 325,000 816,854 -- 25,000 -- 4,042
Executive Vice President
and 1996 300,466 318,817 -- 5,000 -- 3,579
Chief Operating Officer 1995 291,486 -- -- 42,526 -- 3,540
---- ------- --------- ------- ------ -- -----
Geoffrey J. Hibner(5)........ 1997 174,468 514,014 159,103 30,000 -- 700
Senior Vice President -- 1996 -- -- -- -- -- --
Finance and Administration 1995 -- -- -- -- -- --
and Chief Financial Officer
---- ------- --------- ------- ------ -- -----
Keith D. Monda(6)............ 1997 285,272 543,183 -- 15,000 -- 3,939
Senior Vice President -- 1996 268,000 232,638 -- 2,500 -- 3,555
Operations 1995 260,192 -- 28,341 42,692 -- 3,540
---- ------- --------- ------- ------ -- -----
Gregory W. VanWormer......... 1997 274,300 522,291 -- 15,000 -- 3,911
Senior Vice President and 1996 252,292 171,957 -- 15,000 -- 3,547
General
Manager -- Marketing 1995 226,727 -- -- 31,484 -- 3,540
---- ------- --------- ------- ------ -- -----
</TABLE>
- ---------------
(1) The amount for Mr. Sidney Swartz includes an auto allowance of $53,080 paid
during 1997. The amounts indicated for Mr. Hibner and Mr. Monda include
relocation expenses of $154,903 paid during 1997 and $21,141 paid during
1995, respectively. These relocation amounts include payments for income
taxes owed for the reimbursement of such expenses.
(2) The 1995 amounts include replacement options granted on December 19, 1995 in
the following amounts, in exchange for a larger number of options granted
previously: Mr. Jeffrey Swartz, 42,526 shares; Mr. Monda, 37,192 shares; and
Mr. VanWormer, 29,134 shares.
(3) The Company paid group term life insurance premiums and made contributions
to the Company's 401(k) Plan, as follows:
<TABLE>
<CAPTION>
GROUP TERM LIFE INSURANCE
PREMIUMS CONTRIBUTIONS TO 401(K) PLAN
-------------------------- ----------------------------
NAME 1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sidney W. Swartz...................... $1,270 $698 $540 $3,200 $3,000 $3,000
Jeffrey B. Swartz..................... 842 579 540 3,200 3,000 3,000
Geoffrey J. Hibner.................... 700 -- -- -- -- --
Keith D. Monda........................ 739 555 540 3,200 3,000 3,000
Gregory W. VanWormer.................. 711 547 540 3,200 3,000 3,000
</TABLE>
(4) Reference is made to the information contained under the caption "Certain
Relationships and Related Transactions" in this Proxy Statement for certain
benefits payable upon the death of Sidney Swartz.
(5) Mr. Hibner joined the Company on May 14, 1997.
(6) Mr. Monda's employment with the Company ended on January 9, 1998.
5
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock
options to the Named Executive Officers during the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
- -------------------------------------------------------------------------------- -------------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE
GRANTED FISCAL YEAR PRICE EXPIRATION
NAME (#) (%) ($) DATE 5%($) 10%($)
---- ---------- ------------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Sidney W. Swartz.......... -- -- -- -- -- --
Jeffrey B. Swartz......... 25,000 8.11 50.125 5/16/07 788,084 1,997,159
Geoffrey J. Hibner........ 30,000 9.73 50.125 5/16/07 945,700 2,396,890
Keith D. Monda............ 15,000 4.87 50.125 5/16/07 472,850 1,198,295
Gregory W. VanWormer...... 15,000 4.87 50.125 5/16/07 472,850 1,198,295
All Shareholders(2)....... -- -- -- -- 353,708,676 896,373,165
</TABLE>
- ---------------
(1) Based on the exercise price on the date of grant and annual appreciation of
such price through the expiration date of such options at the stated
annualized rate. The actual value, if any, that an optionee may realize upon
exercise will depend on the excess of the market price for the Class A
Common Stock over the option exercise price on the date the option is
exercised. There is no assurance that the actual value realized by an
optionee upon the exercise of an option will be at or near the value
estimated above.
(2) The potential realizable value for "All Shareholders" is determined on the
assumption that the price of Class A Common Stock appreciated over the term
of the options from the $50.125 per share market price as of the date of
grant at an annualized rate (a) of 5% (which would result in a value on May
16, 2007 of $81.65 per share); and (b) 10% (which would result in a value on
May 16, 2007 of $130.01 per share). The "All Shareholders" information is
calculated based on 8,486,822 shares of Class A Common Stock and 2,733,832
shares of Class B Common Stock outstanding as of May 2, 1997. Thus, for
comparative purposes, the total value of such Common Stock as of May 16,
1997, the date on which the options were granted, would be $562,435,282.
6
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for each of the Named Executive
Officers as to the total number of exercised and unexercised stock options held
at December 31, 1997 and the value of unexercised "in-the-money" stock options
held at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT "IN-THE-MONEY" OPTIONS
ACQUIRED ON VALUE FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
---- ----------- ----------- ---------------------------- ----------------------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
Sidney W. Swartz.......... -- -- -- --
Jeffrey B. Swartz......... -- -- 92,349/50,177 3,937,187/1,151,517
Geoffrey J. Hibner........ -- -- --/30,000 --/ 238,140
Keith D. Monda............ 4,422 90,651 31,207/34,063 1,164,338/ 837,712
Gregory W. VanWormer...... 1,889 81,582 17,372/39,873 655,044/1,060,875
</TABLE>
- ---------------
(1) Stock options are "in-the-money" at fiscal year-end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
stock option. The amounts shown in column (e) represent the difference
between the closing price of the Company's Class A Common Stock on December
31, 1997 ($58.063) and the exercise price of those options which are
"in-the-money," multiplied by the applicable number of underlying
securities.
7
<PAGE> 11
PERFORMANCE GRAPH
Set forth below is a graph showing the five-year cumulative total return of
Class A Common Stock as compared with the Standard & Poor's 500 Stock Index and
the weighted average of the Standard & Poor's Shoe Index and the Standard &
Poor's Textile and Apparel Manufacturers Index, weighted in proportion to the
percent of the Company's revenue from product sales (excluding royalties on
products sold by licensees) derived from sales of footwear and from apparel and
accessories, respectively, for each year.
<TABLE>
<CAPTION>
Weighted Average
of S&P Shoe Index
and S&P Textile
and Apparel
Measurement Period Manufacturers
(Fiscal Year Covered) Timberland S&P 500 Index Index
<S> <C> <C> <C>
1992 1 100.00 100.00 100.00
1993 273.72 110.08 71.20
1994 112.18 111.53 91.19
1995 101.92 153.45 117.77
1996 194.87 188.68 189.66
1997 297.75 251.63 139.60
</TABLE>
- ---------------
(1) Indexed to 12/31/92.
8
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of Abraham Zaleznik, Chairman, and Ian
W. Diery. At all times, members of the Compensation Committee have been
independent directors. The Compensation Committee's responsibilities include:
determining and presenting to the Board of Directors for its ratification the
compensation of the Chief Executive Officer and the Chief Operating Officer;
determining the compensation of the executive officers who report directly to
the Chief Operating Officer; and reviewing the compensation determined by
management for all other executive officers of the Company. The Compensation
Committee also administers the Company's stock benefit plans, except for the
Company's 1991 Employee Stock Purchase Plan, which is administered by a
committee comprised of management officers chosen by the Board of Directors, and
the Company's 1991 Stock Option Plan for Non-Employee Directors, under which the
grant of stock options is automatic, as described above under the heading
"Directors' Compensation." In that administrative capacity, the Compensation
Committee granted all stock options which were awarded by the Company in 1997 to
its employees.
In performing its compensation-related responsibilities described above,
the Compensation Committee attempts to set annual salary levels for the
Company's executive officers at the competitive mid-point of the salaries set
for a representative group of comparable executives of similar companies and to
set annual bonuses and long-term incentives at levels that, when combined with
annual salaries and assuming that actual performance is equal to the established
performance goals, will approximate the seventy-fifth percentile of average
total compensation set for such group. Annual salaries, as well as target
bonuses and incentives, for the Company's executive officers are established
based on survey data provided to the Company by independent compensation
consulting and executive recruiting firms engaged by the Company.
Annual cash bonuses are payable under the Company's Short-Term Incentive
Plan for Managerial Employees (the "STIP"). Pursuant to the STIP, the
Compensation Committee annually reviews management's financial performance goals
for the Company, job performance goals for STIP participants and target bonus
awards for such participants, expressed as a percentage of such participants'
salaries. Annual STIP bonuses are awarded according to a formula based upon the
achievement, in whole or in part, of these Company and individual performance
goals. STIP participants who have job responsibilities within the Company's
business units (as opposed to its corporate functions) are also evaluated on the
performance of their respective business units. The annual STIP bonuses for
higher-level executives are more heavily influenced by Company performance than
are those for lower-level executives. The annual bonuses for the Chief Executive
Officer and the Chief Operating Officer depend entirely on Company performance.
The amount of annual bonus awards under the STIP may exceed 100% of the target
bonus awards established for the relevant performance period when actual Company
performance exceeds targeted goals.
In January 1997, the Compensation Committee recommended, and the Board of
Directors approved, increases in the 1997 annual base salary levels for Sidney
Swartz of 4.6% and Jeffrey Swartz of 7.2%. The Compensation Committee also
approved an increase of 5.5% in the 1997 annual base salary for each of Keith
Monda and Gregory VanWormer. For 1997, the Compensation Committee approved STIP
target bonus awards for the Named Executive Officers (including the Chief
Executive Officer and the Chief Operating Officer, whose actual bonus awards for
1997 were ratified by the independent members of the Board of Directors) that
were based on the Company's achievement of earnings per share and cash flow
targets. Because the Company's earnings per share and cash flow for 1997
exceeded the Company performance goals under the STIP, the bonus award to each
of the Named Executive Officers, as calculated pursuant to the STIP formula,
exceeded his respective base salary for 1997. In addition to these targets, a
portion of the target bonus awards for officers with responsibilities for
managing specific business units was also based on such business units'
achievement of operating contribution, gross margin and cash flow targets.
9
<PAGE> 13
Long-term incentive compensation has historically been in the form of stock
options, granted at the discretion of the Compensation Committee. The Company
makes stock option grants to certain employees at the time of hire and at the
time of promotion, based on the employees' respective levels of responsibility.
In addition, the Company periodically makes stock option grants to certain
employees based on their individual performance and potential. The Compensation
Committee believes that stock options are an appropriate means to compensate the
Company's officers and employees in a manner which encourages them to identify
with the long-term interests of the Company's stockholders. Stock options are
granted on the basis of competitive levels of stock options granted to
comparable employees of similar companies, except that the Company's Chief
Executive Officer has never been granted a stock option because he has a sizable
equity position in the Company. Stock options become exercisable at such times
as the Compensation Committee prescribes. All stock options granted in 1997 were
granted at fair market value as of the date of grant, vest in equal installments
on each of the first four anniversaries of the date of grant and expire ten
years from the date of grant.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1,000,000 paid to any of
the company's Chief Executive Officer and four other highest paid executive
officers. However, compensation in the form of stock options is not subject to
the deduction limit if certain requirements are satisfied, including, among
other things, stockholder approval of the material terms of the plan pursuant to
which such stock options are granted. All such stock option compensation in 1997
was fully deductible under Section 162(m). The Compensation Committee recognizes
that STIP bonus awards may exceed the Section 162(m) limitations; however, the
Compensation Committee intends such compensation to qualify for exemption under
Section 162(m) to the maximum extent possible.
COMPENSATION COMMITTEE
Abraham Zaleznik, Chairman
Ian W. Diery
10
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the close of
business on March 3, 1998, regarding shares of Class A Common Stock and Class B
Common Stock beneficially owned by (i) persons known to the Company to be
beneficial owners of 5% or more of the outstanding shares of either Class A
Common Stock or Class B Common Stock, (ii) each director, nominee for director
and Named Executive Officer and (iii) all directors and executive officers as a
group:
<TABLE>
<CAPTION>
SHARES OWNED BENEFICIALLY
-----------------------------------------------
CLASS A CLASS B
----------------------- --------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER(2) PERCENT(3) NUMBER PERCENT
--------------------------------------- --------- ---------- ------ -------
<S> <C> <C> <C> <C>
FMR Corp.(4)..................................... 865,900 9.6 -- --
Putnam Investments, Inc.(5)...................... 664,299 7.3 -- --
State Street Research & Management Company(6).... 647,300 7.2 -- --
Judith H. Swartz and John E. Beard, as Trustees
of The Sidney W. Swartz 1982 Family Trust...... 3,142,017 34.7 -- --
Sidney W. Swartz................................. 84,494 (7) 2,293,373(8) 98.1
Jeffrey B. Swartz................................ 104,369 1.1 28,353 1.2
Robert M. Agate.................................. 10,818 (7) -- --
John F. Brennan.................................. 14,123 (7) -- --
Ian W. Diery..................................... 1,250 (7) -- --
John A. Fitzsimmons.............................. 1,250 (7) -- --
Abraham Zaleznik................................. 11,923 (7) -- --
Geoffrey J. Hibner............................... -- -- -- --
Keith D. Monda................................... 42,659 (7) -- --
Gregory W. VanWormer............................. 22,171 (7) -- --
All directors and executive officers as a group
(13 persons)................................... 316,625 3.4 2,321,726 99.3
</TABLE>
- ---------------
(1) Address, unless otherwise noted: c/o The Timberland Company, 200 Domain
Drive, Stratham, NH 03885.
(2) Amounts include shares issuable upon the exercise of stock options which are
either currently exercisable or will become exercisable within 60 days of
March 3, 1998, as follows: Mr. Jeffrey Swartz, 96,305; Mr. Agate, 8,123; Mr.
Brennan, 4,373; Mr. Diery, 1,250; Mr. Fitzsimmons, 1,250; Dr. Zaleznik,
4,373; Mr. Monda, 32,602; Mr. VanWormer, 19,872; Mr. Hibner, 0; and all
executive officers and directors as a group, 190,319.
(3) Percentages are calculated on the basis of the amount of outstanding shares
of common stock of such class plus, for each person or group, any securities
that such person or group has the right to acquire within 60 days of March
3, 1998, pursuant to options, warrants, conversion privileges or other
rights.
(4) Address: 82 Devonshire Street, Boston, MA 02109. Beneficial ownership based
on the Schedule 13G dated February 14, 1998 filed by FMR Corp. Edward C.
Johnson, 3d, Chairman of FMR Corp., together with various trusts for the
benefit of Johnson family members, may be deemed to form a controlling group
with respect to FMR Corp. Amount includes 858,800 shares (9.5%) beneficially
owned by Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp. Amounts owned by FMR Corp. and Fidelity include
440,700 shares (4.9%) beneficially owned by Fidelity Trend Fund.
(5) Address: One Post Office Square, Boston, MA 02109. Beneficial ownership
based on the Schedule 13G dated January 16, 1998 filed by Putnam
Investments, Inc., a wholly-owned subsidiary of Marsh &
11
<PAGE> 15
McLennan Companies, Inc. Amount includes 664,299 shares (7.6%) beneficially
owned by Putnam Investment Management, Inc., a wholly-owned subsidiary of
Putnam Investments, Inc.
(6) Address: One Financial Center, 30th Floor, Boston, MA 02111-2690. Beneficial
ownership based on the Schedule 13G dated February 11, 1998 filed by State
Street Research & Management Company, which disclaims any beneficial
interest in such shares.
(7) Does not exceed 1% of the class.
(8) Amount includes 9,500 shares of Class B Common Stock held by The Swartz
Family Charitable Trust, as to which Mr. Sidney Swartz, a trustee, disclaims
beneficial ownership.
Sidney W. Swartz, his children and grandchildren, and The Swartz Family
Charitable Trust (the "Charitable Trust"), of which Sidney Swartz and his wife
are the trustees, beneficially own all of the Company's outstanding Class B
Common Stock. Additionally, The Sidney W. Swartz 1982 Family Trust (the "Family
Trust"), a trust for the benefit of his family, owned 3,142,017 shares of Class
A Common Stock on March 3, 1998. As of March 3, 1998, Sidney Swartz, the
Charitable Trust and the Family Trust held, in the aggregate, approximately 81%
of the combined voting power of the Company's capital stock, and the Family
Trust held approximately 35% of the Class A Common Stock, enabling Sidney Swartz
to control the Company's affairs and enabling the Family Trust to influence the
election of the two directors entitled to be elected by the holders of Class A
Common Stock voting separately as a class. Jeffrey Swartz, Executive Vice
President and Chief Operating Officer of the Company, is the son of Sidney
Swartz and is one of the beneficiaries of the Family Trust. Sidney Swartz, by
virtue of his ownership of shares of Class B Common Stock and by virtue of his
position of influence (direct and indirect) over the Company, may be deemed to
be a "control person" of the Company within the meaning of the rules and
regulations under the Securities Act of 1933, as amended.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement between the Company and Sidney Swartz, the Company
will pay to his wife for the three years following his death (or, if earlier,
until her death) a monthly amount equal to Mr. Swartz' monthly salary at the
time of his death, if Mr. Swartz should die while he is an employee of the
Company.
David Swartz serves as a member of the Company's Product Development
Department and is the son of Sidney Swartz. The 1997 total compensation of David
Swartz was approximately $120,788.
FINANCIAL INFORMATION
The Company's 1997 Annual Report to security holders, which includes
audited financial statements and other business information, was mailed to
security holders of the Company on or about March 30, 1998, and is incorporated
herein by reference.
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, filed by the Company with the Securities and Exchange Commission, may
be obtained without charge by contacting the Investor Relations Department, The
Timberland Company, 200 Domain Drive, Stratham, New Hampshire 03885 (telephone:
(603) 773-1212).
12
<PAGE> 16
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons holding more than 10% of the Class A
Common Stock are required to report their ownership of Class A Common Stock and
any changes in that ownership to the Securities and Exchange Commission.
Specific due dates for these reports have been established and the Company is
required to report in this Proxy Statement any failure to file by these dates.
All of these filing requirements were satisfied by such persons during and with
respect to fiscal year 1997. In making this disclosure, the Company has relied
solely on written representations of its directors, its executive officers and
persons holding more than 10% of the Class A Common Stock and copies of the
reports that these persons have filed with the Securities and Exchange
Commission and furnished to the Company.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any additional matters should properly come before the Annual
Meeting, it is the intention of the persons appointed as proxies in the enclosed
proxy to vote such proxy in accordance with their judgment on any such matters.
STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the 1999 Proxy
Statement and proxy relating to the 1999 Annual Meeting of Stockholders,
provided they are received by the Secretary of the Company no later than
November 30, 1998 and are otherwise in compliance with applicable Securities and
Exchange Commission regulations.
13
<PAGE> 17
983-PS-98
<PAGE> 18
DETACH HERE
PROXY
THE TIMBERLAND COMPANY
ANNUAL MEETING OF STOCKHOLDERS - MAY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sidney W. Swartz and Jeffrey B. Swartz, and
each of them, as attorneys and proxies, with the power of substitution, to
represent and vote, as designated on the reverse side hereof, all shares of the
Class A Common Stock of The Timberland Company (the "Company") at the Annual
Meeting of Stockholders of the Company to be held at the headquarters of the
Company, 200 Domain Drive, Stratham, New Hampshire 03885 on Thursday, May 21,
1998, at 9:30 a.m. and at any adjournments thereof, which the undersigned could
vote if present, in such manner as they, or either of them, may determine on any
matters which may properly come before the meeting or any adjournments thereof
and to vote on the matters set forth on the reverse side hereof as hereinafter
specified.
Each share of Class A Common Stock entitles the holder of record thereof
at the close of business on March 24, 1998 to one vote per share, and each share
of Class B Common Stock entitles the holders of record thereof at the close of
business on March 24, 1998 to ten votes per share. The holders of Class A Common
Stock will vote separately as a class with respect to the election of two
nominees for director, John F. Brennan and Abraham Zaleznik, and the holders of
Class A Common Stock and the holders of Class B Common Stock will vote together
as a single class with respect to the election of five nominees for director,
Sidney W. Swartz, Jeffrey B. Swartz, Robert M. Agate, Ian W. Diery and John A.
Fitzsimmons.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
TO FIX THE NUMBER OF DIRECTORS AT SEVEN AND TO ELECT THE SEVEN NOMINEES, AND THE
PROXIES IN THEIR DISCRETION ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS NOT
NOW KNOWN AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE (CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE) SIDE
- ----------- -----------
<PAGE> 19
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
1. To fix the number of directors at seven for the coming year, subject to
further action by the Board of Directors as provided in the Company's
By-Laws, and to elect the following nominees:
Sidney W. Swartz, Jeffrey B. Swartz, Robert M. Agate, John F. Brennan,
Ian W. Diery, John A. Fitzsimmons and Abraham Zaleznik.
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 here personally, exactly as your name is printed on
your stock certificate. If the stock is registered in more than one
name, each joint owner or each fiduciary should sign personally.
Only authorized officers should sign for a corporation.
Signature: ______________________________ Date: ______________ Signature: ______________________________ Date: ______________
</TABLE>
