<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))
THE TIMBERLAND COMPANY
(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
THE TIMBERLAND COMPANY
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
March 26, 1999
TO THE STOCKHOLDERS:
The Board of Directors and Officers of The Timberland Company invite you to
attend the 1999 Annual Meeting of Stockholders to be held on Thursday, May 20,
1999, 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
<PAGE> 3
THE TIMBERLAND COMPANY
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C>
DATE: Thursday, May 20, 1999
TIME: 9:30 a.m.
LOCATION: The Timberland Company
World Headquarters
200 Domain Drive
Stratham, New Hampshire
</TABLE>
PURPOSES FOR MEETING:
1. To fix the number of directors at nine for the coming year, subject
to further action by the Board of Directors as provided in the
Company's By-Laws, and to elect nine directors to hold office until
their successors are duly elected and qualified;
2. To increase the number of shares reserved for issuance under the
Company's 1991 Employee Stock Purchase Plan from 200,000 to 300,000;
and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Holders of Class A Common Stock will vote separately as a class to elect
three directors. Holders of Class A Common Stock and holders of Class B Common
Stock will vote together as a single class to elect the remaining six directors.
You will receive notice of and may vote and act at the Annual Meeting only
if you are a stockholder of record at the close of business on Monday, March 22,
1999.
By Order of the Board of Directors,
/s/ John E. Beard
JOHN E. BEARD
Secretary
March 26, 1999
<PAGE> 4
THE TIMBERLAND COMPANY
200 DOMAIN DRIVE
STRATHAM, NEW HAMPSHIRE 03885
(603) 772-9500
PROXY STATEMENT
MARCH 26, 1999
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The Board of Directors of The Timberland Company, a Delaware corporation
("Timberland" or the "Company"), is sending you the enclosed proxy in connection
with its 1999 Annual Meeting of Stockholders (the "Annual Meeting") and any
adjourned sessions of the Annual Meeting. The Annual Meeting will be held on
Thursday, May 20, 1999, at 9:30 a.m., at the Company's headquarters located at
200 Domain Drive, Stratham, New Hampshire. The purposes of the Annual Meeting
are:
1. to fix the number of directors at nine for the coming year and to elect
nine directors to hold office until their successors are duly elected
and qualified;
2. to increase the number of shares reserved for issuance under the
Company's 1991 Employee Stock Purchase Plan (the "ESPP") from 200,000 to
300,000; and
3. to transact such other business as may properly come before the Annual
Meeting and any adjournments of the Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
You may vote at the Annual Meeting only if you are a stockholder of record
as of the close of business on Monday, March 22, 1999. As of February 19, 1999,
the following number of shares of the Company's Common Stock were outstanding:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
CLASS OF COMMON STOCK OUTSTANDING
- --------------------- -----------
<S> <C>
Class A Common Stock, $.01 par value ("Class A Common
Stock")................................................... 9,178,937
Class B Common Stock, $.01 par value ("Class B Common
Stock")................................................... 2,337,849
</TABLE>
The Company bears all costs of solicitation of proxies. The Company may
solicit proxies personally or by telephone, mail or telegram. None of the
Company's directors, officers or employees will be specially compensated for
soliciting proxies. The Company expects to mail this Proxy Statement and the
enclosed proxy to stockholders on March 26, 1999.
To vote your shares at the Annual Meeting, you must properly sign and
return the enclosed proxy. You may specify in the proxy how you want to vote
your shares. If you sign and return your proxy but do not specify how to vote
your shares, then your shares will be voted to fix the number of directors at
nine and to elect all nine nominees named in this Proxy Statement and to
increase the number of shares reserved for issuance under the ESPP from 200,000
to 300,000.
<PAGE> 5
You may revoke your proxy at any time before the Annual Meeting by either:
- attending the Annual Meeting and voting in person;
- filing with the Secretary of the Company an instrument in writing
revoking your proxy; or
- delivering to the Secretary a newly executed proxy bearing a later date.
If a nominee for director is unable to serve as a director, the persons
appointed as proxy for the Annual Meeting may, in their discretion, vote for
another person as director or vote to reduce the number of directors to less
than nine, as the Board of Directors may recommend. The Company believes that
all of the nominees will be available for election.
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, the persons appointed as proxy to vote on such matters intend to vote
in accordance with their judgment.
QUORUM
A quorum of the Company's stockholders must be present, whether by proxy or
in person, for the Annual Meeting to occur. 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 constitutes a quorum.
To determine the presence of a quorum, the following will count as shares
present and entitled to be cast:
- shares represented by proxies that withhold authority to vote for a
nominee for director;
- shares represented by proxies that indicate an abstention to vote for a
nominee for director; or
- a "broker non-vote" (shares held by your brokers or nominees as to which
(i) you have not provided voting instructions and (ii) the broker or
nominee does not have discretionary voting power).
REQUIRED VOTES AND METHOD OF TABULATION
You are entitled to one vote for each share of Class A Common Stock you
hold. You are entitled to ten votes for each share of Class B Common Stock you
hold. Holders of Class A Common Stock will vote separately as a class to elect
nominees Robert M. Agate, John F. Brennan and Abraham Zaleznik. Holders of Class
A Common Stock and holders of Class B Common Stock will vote together as a
single class to elect nominees Sidney W. Swartz, Jeffrey B. Swartz, Ian W.
Diery, John A. Fitzsimmons, Virginia H. Kent and Indra K. Nooyi.
The Company will appoint election inspectors who will count the votes cast
by proxy or in person at the Annual Meeting. The nine nominees for election as
directors who receive the greatest number of votes properly cast will be
elected. Approval of the increase in the number of shares reserved for issuance
under the ESPP requires the affirmative vote of a majority of the votes properly
cast at the Annual Meeting on that matter. Holders of Class A Common Stock and
holders of Class B Common Stock also will vote together as a single class on any
other matter to be voted on at the Annual Meeting.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP will audit the consolidated financial statements of
the Company for the year ended December 31, 1999 and will report the results of
the audit to the Audit Committee of the Board of Directors. A representative of
Deloitte & Touche LLP will be present at the Annual Meeting, and will have the
opportunity to make a statement if he or she desires and to respond to
appropriate questions.
2
<PAGE> 6
ITEM 1. ELECTION OF DIRECTORS
The directors elected at each Annual Meeting serve for the following year
and until their respective successors are duly elected and qualified. The
Company's By-Laws specify that the Board of Directors or the stockholders may
determine the number of directors of the Company. The stockholders or the Board
of Directors may increase the number of directors fixed at the Annual Meeting
and may fill any vacancy arising on the Board of Directors.
The current Board of Directors consists of eight members, all of whom are
nominees for director at the Annual Meeting. Ms. Nooyi was elected as director
effective as of December 16, 1998. All other directors were elected at the 1998
Annual Meeting of Stockholders held on May 21, 1998. Ms. Kent is a nominee for
the Company's Board of Directors for the first time.
INFORMATION WITH RESPECT TO NOMINEES
The names, ages, principal occupations during the past five years and
certain other information with respect to the nominees for election are as
follows:
<TABLE>
<CAPTION>
NAME AND YEAR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
FIRST ELECTED DIRECTOR AGE AND DIRECTORSHIPS OF OTHER PUBLIC COMPANIES
---------------------- --- -----------------------------------------------
<S> <C> <C>
Sidney W. Swartz (1978)...... 63 Sidney Swartz has been the Company's Chairman of the
Board since June 1986. He also was the Company's Chief
Executive Officer and President from June 1986 until June
1998.
Jeffrey B. Swartz (1990)..... 39 Jeffrey Swartz has been the Company's President and Chief
Executive Officer since June 1998. Prior to this, Jeffrey
Swartz was the Company's Chief Operating Officer from May
1991 and its Executive Vice President from March 1990. He
is also a director of Central Tractor Farm & Country,
Inc. Jeffrey Swartz is the son of Sidney Swartz.
Robert M. Agate (1992)....... 63 Mr. Agate was the Senior Executive Vice President and
Chief Financial Officer of Colgate-Palmolive Company from
January 1992 until his retirement in July 1996.
John F. Brennan (1987)....... 66 Mr. Brennan has been the Dean of the Sawyer School of
Management of Suffolk University since August 1991. Mr.
Brennan is also a director of Aerovox Incorporated and of
Data Storage Corporation.
Ian W. Diery (1996).......... 49 Mr. Diery has been the President and Chief Executive
Officer of Electronic Scrip, Inc. since November 1997.
From September 1996 until joining Electronic Scrip, Mr.
Diery was a self-employed consultant. From November 1995
to August 1996, Mr. Diery was the President and Chief
Executive Officer and a Director of AST Research, Inc.
From October 1989 to April 1995, Mr. Diery served at
Apple Computer in a variety of positions, most recently
as Executive Vice President and General Manager of the
Personal Computer Division.
John A. Fitzsimmons (1996)... 56 Mr. Fitzsimmons has been the Senior Vice President --
Consumer Electronics of Circuit City Stores, Inc. since
January 1987.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND YEAR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
FIRST ELECTED DIRECTOR AGE AND DIRECTORSHIPS OF OTHER PUBLIC COMPANIES
---------------------- --- -----------------------------------------------
<S> <C> <C>
Virginia H. Kent............. 44 Ms. Kent has been the President, Global Brands and
Product Development for Hasbro Corporation since October
1996. Prior to that, Ms. Kent was the General Manager,
Girls/Boys/Nerf at Hasbro.
Indra K. Nooyi (1998)........ 43 Ms. Nooyi has been the Senior Vice President, Corporate
Strategy & Development, at Pepsico Inc. since March 1994.
From June 1990, until joining Pepsico, Ms. Nooyi was the
Senior Vice President of Strategy, Planning and Strategic
Marketing for Asea Brown Boveri. She is also a director
of Phoenix Home Life Mutual Insurance Company.
Abraham Zaleznik (1987)...... 75 Dr. Zaleznik has been a Professor Emeritus of Harvard
University and a self-employed consultant since 1990.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee and an Audit Committee.
The members of both committees are independent directors. The Company does not
have a nominating or similar committee.
During 1998, the Board of Directors and its committees held the following
number of meetings:
<TABLE>
<CAPTION>
1998 MEETINGS
-------------
<S> <C>
Board of Directors...................................... 7
Compensation Committee.................................. 4
Audit Committee......................................... 3
</TABLE>
Only Mr. Diery attended less than 75% of the total number of meetings held
in 1998 of the Board of Directors and the committees of the Board on which he
served (he attended four of the seven Board of Directors meetings and all of the
Compensation Committee meetings).
The Compensation Committee.
The Compensation Committee consists of Dr. Zaleznik, Chairman, and Mr.
Diery. The Compensation Committee's responsibilities include:
- determining and presenting to the Board of Directors for its ratification
the compensation of the Chairman and the Chief Executive Officer;
- determining the compensation of the executive officers who report
directly to the Chief Executive Officer;
- reviewing the compensation determined by management for all other
executive officers of the Company; and
- supervising the administration of the Company's stock option and other
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).
4
<PAGE> 8
The Audit Committee.
Mr. Agate, Mr. Brennan and Mr. Fitzsimmons are the members of the Company's
Audit Committee. The functions of the Audit Committee 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.
DIRECTORS' COMPENSATION
Directors who are also employees of the Company do not receive any
compensation for serving as directors. Directors who are not employees of the
Company receive the following fees for their service:
<TABLE>
<CAPTION>
FEE AMOUNT
--- -------
<S> <C>
Annual retainer for director................................ $25,000
Each Board of Directors meeting attended.................... 1,000
Annual retainer for committee chairperson................... 2,500
Each committee meeting attended............................. 500
</TABLE>
Under the Company's 1991 Stock Option Plan for Non-Employee Directors,
directors who are not employees of the Company are automatically granted options
to purchase a fixed number of shares of Class A Common Stock upon the occurrence
of the following events:
<TABLE>
<CAPTION>
NUMBER OF
EVENT SHARES
- ----- ---------
<S> <C>
Initial election as director................................ 5,000
Each anniversary of initial grant........................... 1,250
</TABLE>
These stock options have an exercise price equal to the fair market value
on the date of grant and are exercisable at the rate of 25% of the total
underlying shares on each of the first four anniversaries of the date of grant,
for so long as the director remains a director of the Company. The options
expire ten years from the date of grant or when the holder ceases to be a
director of the Company, if earlier.
During 1998, the Company granted the following stock options to its
non-employee directors:
<TABLE>
<CAPTION>
NUMBER OF
DIRECTOR SHARES DATE OF GRANT EXERCISE PRICE
-------- --------- ----------------- --------------
<S> <C> <C> <C>
Robert M. Agate................................. 1,250 November 12, 1998 $43.94
John F. Brennan................................. 1,250 May 20, 1998 $81.50
Ian W. Diery.................................... 1,250 May 18, 1998 $82.94
John A. Fitzsimmons............................. 1,250 May 18, 1998 $82.94
Indra K. Nooyi.................................. 5,000 December 16, 1998 $35.00
Abraham Zaleznik................................ 1,250 May 20, 1998 $81.50
</TABLE>
See the section of this Proxy Statement entitled "Security Ownership of
Certain Beneficial Owners and Management" for information as to ownership of
Company securities by nominees for director.
5
<PAGE> 9
ITEM 2. INCREASE IN THE NUMBER OF SHARES RESERVED UNDER
THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
A total of 200,000 shares of Class A Common Stock have been reserved for
issuance under the ESPP. The Company believes the ESPP encourages employee stock
ownership and increases the employees' proprietary interest in the Company's
success by providing an opportunity for eligible employees to purchase shares of
Class A Common Stock at a reduced price. As of January 1, 1999, there were
27,730 shares of Class A Common Stock remaining available for issuance under the
ESPP. The Company expects that such available shares will be purchased during
1999 and the first half of 2000. The Board believes that it is important to
continue to encourage employee stock ownership in the Company. As a result, on
February 25, 1999, the Board approved, and is submitting for stockholder
approval, a proposal to increase the number of shares of Class A Common Stock
reserved for issuance under the ESPP from 200,000 shares to 300,000 shares.
GENERAL DESCRIPTION OF THE ESPP
The ESPP was adopted by the Board of Directors on February 22, 1991 and
approved by the stockholders on May 16, 1991. On May 16, 1995, the stockholders
approved an increase in the number of shares of Class A Common Stock reserved
for issuance under the ESPP from 100,000 shares to 200,000 shares. Employees of
the Company and its retail and domestic manufacturing subsidiaries who have
worked for the Company for at least six continuous months and customarily work
in excess of 20 hours per week and five months in each calendar year are
eligible to participate in the ESPP. However, employees who own 5% or more of
the Class A Common Stock are not eligible. As of January 1, 1999, approximately
1,236 employees were eligible to participate in the ESPP.
Eligible employees may contribute, through payroll withholdings, from 2% to
10% of their regular base compensation during six-month participation periods.
The number of shares purchased is determined by dividing the balance in the
employee's withholding account on the last day of the participation period by
85% of the fair market value of Class A Common Stock on either the first or the
last day of the participation period, whichever is lower. An employee may not
purchase an amount of Class A Common Stock with a fair market value exceeding
$25,000 (determined at the first trading day of each participation period) in
any calendar year.
An employee may cancel his or her participation at any time prior to the
last day of a participation period. If an employee terminates his participation,
then the Company will return to him the balance of his withholding account
without interest. No employee may sell, pledge, assign or otherwise transfer
rights to purchase shares under the ESPP. The ESPP does not and should not be
construed to give an employee the right to be employed by the Company.
In the event there is a change in the outstanding stock of the Company due
to a stock dividend, stock split, combination of shares, recapitalization,
merger or other capital change, the aggregate number of shares available under
the ESPP, the purchase price and other relevant provisions will be appropriately
adjusted.
The ESPP is administered by an Administrative Committee composed of three
management employees appointed by the Board of Directors. Only the Board of
Directors, however, has the power to amend the ESPP (other than to increase the
number of shares to be issued under the Plan, which is subject to stockholder
approval) or to terminate the ESPP. If the number of shares of Class A Common
Stock receivable by all participants (calculated by dividing the total amount of
all payroll deductions during the participation period by the applicable
purchase price) exceeds the number of shares then available under the ESPP, then
the Administrative Committee will reduce proportionally the number of shares to
be issued.
6
<PAGE> 10
FEDERAL TAX EFFECTS
For U.S. Federal income tax purposes, neither the participation in the ESPP
nor the purchase of stock under the ESPP will produce ordinary income to the
employee or a deduction to the Company.
In general, an employee who disposes of shares purchased under the ESPP
within two years after the first day of the participation period relating to
those shares will recognize: (i) ordinary income on the difference between the
purchase price and the fair market value on the last day of the applicable
participation period, and (ii) a capital gain or loss on the difference between
the amount realized on the sale and the employee's basis in the shares (i.e.,
the purchase price plus any ordinary income recognized by reason of the sale).
If an employee disposes of shares purchased under the ESPP more than two
years after the first day of the participation period relating to the purchased
shares, or dies at any time while holding such shares, ordinary income will be
recognized equal to the lesser of (i) the excess of the fair market value of the
shares at the time of disposition or death over the purchase price, or (ii) 15%
of the fair market value of the shares on the first day of the participation
period relating to the purchased shares. The Company will not be entitled to a
deduction for this amount. In addition to ordinary income, capital gain will be
recognized on the excess, if any, of the amount realized on a sale or exchange
over the employee's basis in the shares (i.e., the purchase price paid by the
employee plus any ordinary income recognized by reason of the sale).
The foregoing is intended as a summary of U.S. Federal income tax
consequences associated with the ESPP and does not involve any discussion of
other U.S. Federal tax consequences or of state, local or non-U.S. taxes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ITEM 2.
APPROVAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST AT THE
ANNUAL MEETING.
7
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table lists the 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, 1998 (hereinafter all
the foregoing persons are together referred to as the "Named Executive
Officers"), for the fiscal years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- --------------------------
(a) (b) (c) (d) (e) (g) (h) (i)
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION(1)($) OPTIONS(#) PAYOUTS($) SATION(2)($)
--------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sidney W. Swartz(3).......... 1998 550,004 423,984 110,877 -- -- 6,226
Chairman 1997 489,996 1,231,565 79,968 -- -- 4,470
1996 464,362 483,718 -- -- -- 3,698
---- ------- --------- ------- ------ -- -----
Jeffrey B. Swartz(4)......... 1998 437,543 385,440 58,147 50,000 -- 5,939
President and Chief 1997 325,000 816,854 -- 25,000 -- 4,042
Executive Officer 1996 300,466 318,817 -- 5,000 -- 3,579
---- ------- --------- ------- ------ -- -----
Geoffrey J. Hibner(5)........ 1998 280,748 163,958 -- 5,000 -- 5,528
Senior Vice President -- 1997 174,468 514,014 159,103 30,000 -- 700
Finance and Administration 1996 -- -- -- -- -- --
and Chief Financial Officer
---- ------- --------- ------- ------ -- -----
Kenneth P. Pucker............ 1998 275,271 176,660 -- 50,000 -- 5,513
Senior Vice President and 1997 212,362 329,989 -- 15,000 -- 3,745
General
Manager -- Footwear...... 1996 158,461 112,619 -- 10,500 -- 3,329
---- ------- --------- ------- ------ -- -----
Carden N. Welsh(6)........... 1998 208,846 137,240 -- 12,000 -- 4,980
Senior Vice President -- 1997 147,394 213,258 -- 7,500 -- 3,579
International 1996 126,462 77,329 -- 1,500 -- 2,802
---- ------- --------- ------- ------ -- -----
</TABLE>
- ---------------
(1) The amounts for Sidney Swartz include an auto allowance of $75,430 and use
of the Company plane of $35,447 for 1998, and an auto allowance of $53,080
for 1997. The amount for Jeffrey Swartz includes use of the Company plane of
$47,022 for 1998. The amount indicated for Mr. Hibner includes relocation
expenses of $154,903 paid during 1997, including payments for income taxes
owed for the reimbursement of such expenses.
(2) 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 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sidney W. Swartz.................... $1,426 $1,270 $698 $4,800 $3,200 $3,000
Jeffrey B. Swartz................... 1,139 842 579 4,800 3,200 3,000
Geoffrey J. Hibner.................. 728 700 -- 4,800 -- --
Kenneth P. Pucker................... 713 545 329 4,800 3,200 3,000
Carden N. Welsh..................... 536 379 273 4,444 3,200 2,529
</TABLE>
(3) Sidney Swartz was also the Company's President and Chief Executive Officer
until June 1998. Reference is made to the information contained under the
caption "Certain Relationships and Related Transactions" in this Proxy
Statement for certain benefits payable upon the death of Sidney Swartz.
(4) Jeffrey Swartz was the Company's Executive Vice President and Chief
Operating Officer until June 1998.
(5) Mr. Hibner joined the Company on May 14, 1997.
(6) Mr. Welsh was the Company's Treasurer until May 1998.
8
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock
options to the Named Executive Officers during the fiscal year ended December
31, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
- ---------------------------------------------------------------------------- ---------------------------
(a) (b) (c) (d) (e) (f) (g)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE
GRANTED FISCAL YEAR PRICE EXPIRATION
NAME (#) (%) ($) DATE 5%($) 10%($)
---- ---------- ------------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Sidney W. Swartz...... -- -- -- -- -- --
Jeffrey B. Swartz..... 50,000 18.0 72.125 2/26/2008 2,267,951 5,747,434
Geoffrey J. Hibner.... 5,000 1.8 72.125 2/26/2008 226,795 574,743
Kenneth P. Pucker..... 10,000 3.6 72.125 2/26/2008 453,590 1,149,487
40,000 14.4 82.063 5/21/2008 2,064,359 5,231,492
Carden N. Welsh....... 2,000 0.7 72.125 2/26/2008 90,718 229,897
10,000 3.6 82.063 5/21/2008 516,090 1,307,873
All Shareholders(2)... -- -- -- -- 517,138,957 1,310,532,657
</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 an annualized rate
of 5% and 10%. 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 $72.125 per share market price as of February 26,
1998, the date on which most of the stock options granted in 1998 were
granted, at an annualized rate of (a) 5% (which would result in an
appreciated price on February 26, 2008 of $117.48 per share); and (b) 10%
(which would result in an appreciated price on February 26, 2008 of $187.07
per share). The "All Shareholders" information is calculated based on
9,062,860 shares of Class A Common Stock and 2,338,162 shares of Class B
Common Stock outstanding as of March 27, 1998. Thus, for comparative
purposes, the total value of such Common Stock as of February 26, 1998 would
be $822,298,712.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for each of the Named Executive
Officers as to the total number of exercised and unexercised stock options held
at December 31, 1998 and the value of unexercised "in-the-money" stock options
held at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT "IN-THE-MONEY" OPTIONS
ACQUIRED ON VALUE FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
---- ----------- ----------- ---------------------------- ----------------------------
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Sidney W. Swartz.......... -- -- -- --
Jeffrey B. Swartz......... -- -- 115,481/77,045 3,205,469/215,710
Geoffrey J. Hibner........ -- -- 7,500/27,500 0/ 0
Kenneth P. Pucker......... 1,809 97,912 15,297/67,344 312,295/210,911
Carden N. Welsh........... 1,000 71,000 13,530/19,428 290,047/ 47,439
</TABLE>
- ---------------
(1) Stock options are "in-the-money" if the fair market value of the Class A
Common Stock 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, 1998 ($45.563) and the
exercise price of those options which are "in-the-money" on that date,
multiplied by the applicable number of underlying securities.
10
<PAGE> 14
PERFORMANCE GRAPH
The following graph shows 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. The total return for the Company is
weighted in proportion to the percent of the Company's revenue derived from
sales of footwear and from apparel and accessories (excluding royalties on
products sold by licensees), respectively, for each year.
<TABLE>
<CAPTION>
TIMBERLAND S&P 500 INDEX WEIGHTED AVERAGE OF S&P
---------- ------------- SHOE INDEX AND S&P
TEXTILE AND APPAREL
MANUFACTURERS INDEX
-----------------------
<S> <C> <C> <C>
1993(1) 100.00 100.00 100.00
1994 40.98 101.32 128.25
1995 37.24 139.40 165.38
1996 71.19 171.40 266.84
1997 108.78 228.59 195.48
1998 85.36 293.91 187.72
</TABLE>
- ---------------
(1) Indexed to December 31, 1993.
11
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL.
The Compensation Committee consists of Dr. Zaleznik, Chairman, and Mr.
Diery. The Compensation Committee's responsibilities are discussed above under
the heading "Committees of the Board of Directors."
The Compensation Committee attempts to set annual salary levels for the
Company's executive officers, including the Chief Executive Officer, at the
competitive mid-point of the salaries of executives in comparable positions at
similar companies. The Compensation Committee attempts 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. The Compensation Committee uses survey data provided by
independent compensation consulting and executive recruiting firms engaged by
the Company.
THE SHORT-TERM INCENTIVE PLAN FOR MANAGERIAL EMPLOYEES.
Cash bonuses are payable under the Company's Short-Term Incentive Plan for
Managerial Employees ("STIP") pursuant to the Company's 1997 Incentive Plan
approved by the Company's stockholders in May 1997, and are intended to qualify
as performance-based awards. 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
business units' achievement of some or all of the following target measurements:
revenue, operating contribution, gross margin rate and cash flow. The annual
STIP bonuses for higher-level executives are more heavily influenced by Company
performance than are those for lower-level executives. The amount of annual
bonus awards under the STIP may exceed 100% of the target bonus awards
established if actual Company performance exceeds targeted goals.
For 1998, the Compensation Committee approved STIP target bonus awards for
the Chief Executive Officer and the other Named Executive Officers that were
based entirely on the Company's achievement of earnings per share and cash flow
targets. The independent members of the Board of Directors ratified the 1998
bonus awards for the Chairman and the President and Chief Executive Officer.
LONG-TERM INCENTIVES -- STOCK OPTIONS.
Long-term incentive compensation is principally in the form of stock
options. 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 employees, including the Chief Executive Officer, with
comparable positions at similar companies. Sidney Swartz has never been granted
a stock option because he has a sizable equity position in the Company.
The Company grants stock options to certain employees at the time of hire
and at the time of promotion, based on their levels of responsibility. In
addition, the Company may make stock option grants to certain employees based on
their individual performance. Stock options become exercisable at such times as
the Compensation Committee prescribes. All stock options granted in 1998 have an
exercise price equal to the fair market value on the date of grant and are
exercisable at the rate of 25% of the total underlying shares on each
12
<PAGE> 16
of the first four anniversaries of the date of grant. These stock options expire
ten years from the date of grant or when the holder ceases to be an employee, if
earlier.
SECTION 162(m) CONSIDERATIONS.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a public company for compensation over $1,000,000 paid to any of
the company's Chief Executive Officer and four other highest paid executive
officers. However, certain performance-based compensation awards, including
awards in the form of stock options, are 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 awards are
granted. All such stock option compensation in 1998 was fully deductible under
Section 162(m). In addition, because the STIP bonus awards are payable pursuant
to the Company's 1997 Incentive Plan, the Compensation Committee believes such
compensation qualifies for exemption under Section 162(m).
COMPENSATION COMMITTEE
Abraham Zaleznik, Chairman
Ian W. Diery
13
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents the number of 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, as of the close of business on January 31, 1999:
<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>
Judith H. Swartz and John E. Beard, as Trustees
of The Sidney W. Swartz 1982 Family Trust..... 3,142,017 34.2 -- --
Jeffrey B. Swartz............................... 137,440 1.5 28,353 1.2
Sidney W. Swartz................................ 110,421 (4) 2,293,373(5) 98.1
Kenneth P. Pucker............................... 24,959 (4) -- --
Carden N. Welsh................................. 15,273 (4) -- --
Abraham Zaleznik................................ 13,173 (4) -- --
John F. Brennan................................. 12,877 (4) -- --
Robert M. Agate................................. 12,718 (4) -- --
Geoffrey J. Hibner.............................. 11,142 (4) -- --
Ian W. Diery.................................... 2,812 (4) -- --
John A. Fitzsimmons............................. 2,812 (4) -- --
Virginia H. Kent................................ -- -- -- --
Lisa H. Macpherson.............................. -- -- -- --
Indra K. Nooyi.................................. -- -- -- --
All directors and executive officers as a group
(14 persons).................................. 363,277 4.0 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 on or before April
1, 1999, as follows: Mr. Agate, 9,373; Mr. Brennan, 5,623; Mr. Diery, 2,812;
Mr. Fitzsimmons, 2,812; Mr. Hibner, 8,750; Mr. Pucker, 23,771; Mr. Jeffrey
Swartz, 129,376; Mr. Welsh, 14,588; Dr. Zaleznik, 5,623; and all executive
officers and directors as a group, 220,753.
(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 on or prior to April 1,
1999, pursuant to options, warrants, conversion privileges or other rights.
(4) Does not exceed 1% of the class.
(5) 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 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 Class B Common Stock. As of
January 31, 1999, Sidney Swartz, the Charitable Trust and The Sidney W. Swartz
1982 Family Trust, a trust for the benefit of his family (the "Family Trust"),
held, in the aggregate, approximately 80% of the combined voting power of the
Company's capital stock, and the Family Trust held approximately 34% of the
Class A Common Stock. By virtue of this stock ownership, Sidney Swartz 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
14
<PAGE> 18
amended, and the Family Trust influences the election of Mr. Agate, Mr. Brennan
and Dr. Zaleznik. Jeffrey Swartz, the Company's President and Chief Executive
Officer, is one of the beneficiaries of the Family Trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
If Sidney Swartz should die while he is an employee of the Company, 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's monthly salary
at the time of his death.
Jeffrey Swartz, the Company's President and Chief Executive Officer, is the
son of Sidney Swartz. David Swartz, a member of the Company's Product
Development Department, is the son of Sidney Swartz. The 1998 total compensation
of David Swartz was approximately $120,000.
FINANCIAL INFORMATION
The Company mailed its 1998 Annual Report to its stockholders on or about
March 26, 1999. The 1998 Annual Report includes audited financial statements and
other business information and is incorporated herein by reference.
To obtain a free copy of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, filed by the Company with the Securities
and Exchange Commission, contact the Investor Relations Department, The
Timberland Company, 200 Domain Drive, Stratham, New Hampshire 03885 (telephone:
(603) 773-1212).
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED
The securities laws of the United States require the Company's directors,
its executive officers and any persons holding more than 10% of the Class A
Common Stock to report their ownership of Class A Common Stock and any changes
in that ownership to the Securities and Exchange Commission. These laws
establish specific due dates for these reports. 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 1998. In making this disclosure, the Company has relied solely on
written representations of its directors, its executive officers and persons who
previously held more than 10% of the Class A Common Stock furnished to the
Company, and copies of the reports that these persons have filed with the
Securities and Exchange Commission.
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, the persons appointed as proxies in the enclosed proxy intend to vote
such proxy in accordance with their judgment on any such matters.
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the 2000 Annual Meeting
of Stockholders must be received by the Secretary of the Company no later than
February 10, 2000 to be presented at that Annual Meeting. To be eligible for
inclusion in next year's Proxy Statement, stockholder proposals must be received
by the Secretary of the Company no later than November 27, 1999. In addition to
these mailing requirements, stockholder proposals also must be in compliance
with applicable Securities and Exchange Commission regulations.
15
<PAGE> 19
983-PS-99
<PAGE> 20
PROXY
THE TIMBERLAND COMPANY
ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 1999
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 at the Annual Meeting of Stockholders of The Timberland
Company (the "Company") and at any adjournments thereof, all shares of the
Company's Class A Common Stock 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 of this proxy as specified by the
undersigned. The 1999 Annual Meeting will be held on Thursday, May 20, 1999, at
9:30 a.m., at the Company's headquarters, 200 Domain Drive, Stratham, New
Hampshire 03885.
A stockholder is entitled to one vote for each share of Class A Common
Stock and ten votes for each share of Class B Common Stock held of record at the
close of business on March 22, 1999. The holders of Class A Common Stock will
vote separately as a class to elect three nominees for director, Robert M.
Agate, 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 to elect six nominees for director, Sidney W. Swartz, Jeffrey B. Swartz,
Ian W. Diery, John A. Fitzsimmons, Virginia H. Kent and Indra F. Nooyi.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED TO FIX THE
NUMBER OF DIRECTORS AT NINE, TO ELECT ALL NINE NOMINEES AND TO APPROVE THE
INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE COMPANY'S 1991
EMPLOYEE STOCK PURCHASE PLAN. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR
DISCRETION UPON SUCH OTHER BUSINESS NOT KNOWN AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE> 21
[ X ] Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES AND
FOR PROPOSAL 2.
1. To fix the number of directors at nine 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:
NOMINEES: Sidney W. Swartz, Jeffrey B. Swartz, Robert M. Agate, John F.
Brennan, Ian W. Diery, John A. Fitzsimmons, Virginia H. Kent, Indra K. Nooyi and
Abraham Zalenik
FOR ALL NOMINEES WITHHELD FROM ALL NOMINEES
[ ] [ ]
[ ] ---------------------------------------
For all nominees except as noted above
2. To increase the number of shares FOR AGAINST ABSTAIN
reserved for the issuance under the [ ] [ ] [ ]
Company's 1991 Employee Stock
Purchase Plan from 200,000 to 300,000
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 certificate 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____________________
