-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KvFsbHbICxEL2FjuNFYfjlYLfS7qiKJML4DhJUZPM+TqVqxSCQ6Y/1zLN45VQ5T8 9W9lpCiya3ZWdyDhBHFSXA== 0000770949-01-500008.txt : 20010816 0000770949-01-500008.hdr.sgml : 20010816 ACCESSION NUMBER: 0000770949-01-500008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REEBOK INTERNATIONAL LTD CENTRAL INDEX KEY: 0000770949 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 042678061 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09340 FILM NUMBER: 1714493 BUSINESS ADDRESS: STREET 1: 1895 J W FOSTER BLVD CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 7814015000 10-Q 1 q.txt 2ND QUARTER 2001 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 Commission file number 1-9340 REEBOK INTERNATIONAL LTD. ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2678061 - ------------------------------------ -------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1895 J.W. Foster Boulevard, Canton, Massachusetts 02021 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (781) 401-5000 ----------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) The number of shares outstanding of registrant's common stock, par value $.01 per share, at August 3, 2001 was 58,965,857 shares. REEBOK INTERNATIONAL LTD. INDEX PART I. FINANCIAL INFORMATION: Item 1 Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - June 30, 2001 and 2000, and December 31, 2000. . . . 3-4 Condensed Consolidated Statements of Income - Three and Six Months Ended June 30, 2001 and 2000 . . 5 Condensed Consolidated Statements of Cash Flows - Three and Six Months Ended June 30, 2001 and 2000. . 6-7 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 8-12 Item 2 Management's Discussion and Analysis of Results Of Operations and Financial Condition. . . . . . . 13-22 Part II. OTHER INFORMATION: Item 1 Legal Proceedings . . . . . . . . . . . . . . . . . 23 Item 2 Changes in Securities . . . . . . . . . . . . . . . 23 Item 3 Defaults Upon Senior Securities . . . . . . . . . . 23 Item 4 Submission of Matters to a Vote of Security-Holders 23 Item 5 Other Information . . . . . . . . . . . . . . . . 23 Item 6 Exhibits. . . . . . . . . . . . . . . . . . . . . . 24 REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) June 30, December 31, 2001 2000 2000 ---- ---- ---- (Unaudited) (See Note 1) Current assets: Cash and cash equivalents $ 149,859 $ 212,572 $ 268,665 Accounts receivable, net of allowance for doubtful accounts (June 2001,$46,908; June 2000, $46,532; December 2000,$48,016) 527,432 496,625 423,830 Inventory 474,952 405,528 393,599 Deferred income taxes 102,279 69,331 101,715 Prepaid expenses and other current assets 46,727 42,919 37,396 --------- --------- --------- Total current assets 1,301,249 1,226,975 1,225,205 --------- --------- --------- Property and equipment, net 136,043 161,255 141,835 Other non-current assets: Intangibles, net of amortization 65,513 71,562 64,288 Deferred income taxes 15,418 41,746 18,110 Other 20,123 21,087 13,608 --------- --------- --------- Total Assets $1,538,346 $1,522,625 $1,463,046 ========= ========= =========
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Amounts in thousands, except per share data) June 30, December 31, 2001 2000 2000 ---- ---- ---- (Unaudited) (See Note 1) Current liabilities: Notes payable to banks $ 22,148 $ 19,097 $ 8,878 Current portion of long-term debt 265 85,176 13,813 Accounts payable 158,055 171,964 172,035 Accrued expenses 286,960 310,199 272,076 Income taxes payable 37,945 4,320 21,337 ---------- ---------- ---------- Total current liabilities 505,373 590,756 488,139 ---------- ---------- ---------- Long-term debt, net of current portion 351,013 339,843 345,015 Minority interest and other long-term liabilities 23,115 34,741 22,029 Commitments and contingencies Stockholders' equity: Common stock, par value $.01; authorized 250,000 shares; issued June 30, 2001, 97,588; issued June 30, 2000, 95,604; issued December 31, 2000, 96,209 976 956 962 Retained earnings 1,381,471 1,245,293 1,301,269 Less 38,716 shares in treasury at cost (653,370) (653,370) (653,370) Unearned compensation (502) (2,690) (1,402) Accumulated other comprehensive income (expense) (69,730) (32,904) (39,596) ---------- ---------- ---------- 658,845 557,285 607,863 ---------- ---------- ---------- Total liabilities and stockholders' equity $1,538,346 $1,522,625 $1,463,046 ========== ========== ========== The accompanying notes are an integral part of the condensed consolidated financial statements.
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ---------------------- --------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net sales $ 711,048 $ 685,076 $1,480,976 $1,454,905 Costs and expenses: Cost of sales 449,899 423,614 932,373 902,318 Selling, general and administrative expenses 227,554 234,799 451,014 469,318 Interest expense, net 4,095 7,166 8,104 12,941 Other (income)expense,net 7,118 1,975 5,742 (1,750) --------- ---------- -------- --------- 688,666 667,554 1,397,233 1,382,827 --------- ---------- -------- --------- Income before income taxes and minority interest 22,382 17,522 83,743 72,078 Income tax expense 6,938 6,606 25,960 27,173 --------- ---------- --------- -------- Income before minority interest 15,444 10,916 57,783 44,905 Minority interest 1,306 246 2,441 2,523 --------- ---------- --------- -------- Net income $ 14,138 $ 10,670 $ 55,342 $ 42,382 ========= ========== ========= ======== Basic earnings per share $ .24 $ .19 $ .95 $ .75 ========= ========== ========= ======== Diluted earnings per share $ .24 $ .19 $ .90 $ .74 ========= ========== ========= ======== The accompanying notes are an integral part of the condensed consolidated financial statements.
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Six months Ended June 30, ---------------- 2001 2000 ---- ---- Cash flows from operating activities: Net income $ 55,342 $ 42,382 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 18,698 21,508 Minority interest 2,441 2,523 Deferred income taxes 2,128 18,975 Other (11,950) (2,518) Changes in operating assets and liabilities: Accounts receivable (101,546) (84,723) Inventory (88,826) (4,117) Prepaid expenses and other (6,554) (1,119) Accounts payable and accrued expenses 4,428 66,595 Income taxes payable 21,073 (4,495) ---------- ---------- Total adjustments (160,108) 12,629 ---------- ---------- Net cash provided by (used for) operating activities (104,766) 55,011 ---------- ---------- Cash flows provided by (used for) investing activities: Payments to acquire property and equipment (11,217) (15,135) Proceeds from business and other non- operating asset disposals 18,092 30,506 Acquisition of minority interest in certain subsidiaries and other business acquisitions (18,832) (1,390) ---------- ---------- Net cash provided by (used for) investing activities (11,957) 13,981 ---------- ----------
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd) (Amounts in thousands) (Unaudited) Six Months Ended June 30, ---------------- 2001 2000 ---- ---- Cash flows provided by (used for) financing activities: Net borrowings (repayments) of notes payable to banks $ 7,237 $ (7,715) Net proceeds from issuance of Convertible Debentures 244,729 Repayments of long-term debt (257,503) (129,976) Proceeds from issuance of common stock to employees 19,787 1,667 Dividends to minority shareholders (8,215) -------- -------- Net cash provided by (used for) financing 6,035 (136,024) activities ________ ________ Effect of exchange rate changes on cash and cash equivalents (8,118) (2,140) -------- -------- Net decrease in cash and cash equivalents (118,806) (69,172) -------- -------- Cash and cash equivalents at beginning of period 268,665 281,744 -------- --------- Cash and cash equivalents at end of period $ 149,859 $ 212,572 ======== ========= Supplemental disclosures of cash flow information: 2001 2000 ---- ---- Cash paid during the period for: Interest $ 11,805 $ 22,595 Income taxes 4,710 9,294 The accompanying notes are an integral part of the condensed consolidated financial statements.
REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands, except share data) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- Basis of Presentation - --------------------- The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods. The interim financial information and notes thereto should be read in conjunction with the Company's latest annual report to shareholders. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of results to be expected for the entire year. The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Certain amounts in the prior year have been reclassified to conform to the 2001 presentation. Recently Issued Accounting Standards - ------------------------------------ As of January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 ("Statement 133"), "Accounting for Derivative Instruments and Hedging Activities", as amended in June 2000 by Statement of Financial Accounting Standards no. 138 ("Statement 138") which requires the Company to recognize all derivatives as either assets or liabilities in the balance sheet and measure such instruments at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value, as determined by measuring the fair value of the derivative against the underlying hedge item, is immediately recognized in earnings. The adoption of these statements did not have a material impact on the Company's consolidated financial statements. The Company is exposed to market risk, such as changes in interest rates, currency exchange rates and material pricing. To manage the volatility related to these exposures, the Company enters into various derivative transactions in accordance with its hedging policy. Designation is performed on a specific exposure basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. Interest Rate Hedging - --------------------- The Company uses interest rate swap agreements to manage its exposure to interest rate movements by effectively converting a portion of its variable rate long-term debt from floating to fixed rates. These agreements are also used to manage interest rate exposure under certain of the Company's leases. These agreements involve the exchange of variable rate payments for fixed rate payments without the effect of leverage and without the exchange of the underlying principal amount. Currency Rate Hedging - --------------------- The Company enters into forward currency exchange contracts and options to hedge its exposure for merchandise purchased in U.S. dollars that will be sold to customers in other currencies. The Company also uses forward currency exchange contracts and options to hedge significant intercompany assets and liabilities denominated in other than the functional currency. Contracts used to hedge intercompany balances are marked to market and the resulting transaction gain or loss is included in the determination of net income. The Company has used forward exchange contracts and options as an element of its risk management strategy for several years. As of June 30, 2001, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions excluding those forecasted transactions related to the payment of variable interest on existing financial instruments, is thirteen months. Net gains in other comprehensive income on June 30, 2001, of $7.9 million, subject to subsequent fair market value adjustments of the derivatives, will be reclassified into earnings during the next twelve months when hedged transactions or cash flows materialize. During the quarter and six months ended June 30, 2001, the Company recorded a $0.5 million expense in other income (expense), net representing hedge ineffectiveness. No gains or losses on derivative instruments' are excluded from the assessment of hedge effectiveness. NOTE 2 - SPECIAL CHARGES - ----------------------- The Company did not record any new special charges during 2001 and 2000, but did change certain previously recorded estimates. The net change in estimates has been reported in other income (expense) in the accompanying consolidated financial statements for the six months ended June 30, 2001. The change in estimates relates primarily to certain provisions that had been made with respect to the possible liquidation or sale of the Company's subsidiary in South Africa. The subsidiary was sold during the first quarter of 2001, and it was determined that certain provisions were no longer necessary. Details of the special charge activity during the six months ended June 30, 2001 are as follows: Employee Legal Severance Marketing Fixed Asset Total Settlement and Other Contracts Write-downs Balance, 12/31/00 $ 41,893 $ 15,809 $ 8,764 $ 6,828 $ 10,492 2001 Utilization (16,852) (13,128) (2,584) (1,140) Change in Estimates (6,810) 3,000 (13) (9,797) ---------------------------------------------------------------------------------- Balance, 12/31/01 $ 18,231 $ 5,681 $ 6,167 $ 5,688 $ 695 ----------------------------------------------------------------------------------
The short-term portion of the accrual, or $9,605, is included in accrued expenses with the balance of $8,626 included in other long-term liabilities. The remaining accruals are expected to be utilized during fiscal 2001 through 2003, as leases expire, consolidations occur, contractual obligations come due and severance payments are made. NOTE 3 - EARNINGS PER SHARE - ----------------------------- The following table sets forth the computation of basic and diluted earnings per share (amounts in thousands, except per share data): Three Months Ended Six Months Ended June 30 June 30 ------------------ ----------------- 2001 2000 2001 2000 ------ ----- ----- ----- Numerator for basic earnings per share: Net income $ 14,138 $ 10,670 $ 55,342 $42,382 ====== ====== ====== ====== Numerator for diluted earnings per share: Net income $ 14,138 $ 10,670 $ 55,342 $42,382 Add: Effect of dilutive securities: Interest on 4.25% convertible Debentures net of income taxes 2,463 ------ ------ ------ ------ $ 14,138 $ 10,670 $ 57,805 $42,382 ====== ====== ====== ====== Denominator for basic earnings per share: Weighted average shares 58,512 56,688 58,173 56,606 ====== ====== ====== ====== Denominator for diluted earnings per share: Weighted average shares 58,512 56,688 58,173 56,606 Dilutive employee stock options 1,661 762 1,690 494 Effect of dilutive securities: Assumed conversion of 4.25% convertible debentures 4,358 ------ ------ ------ ------ 60,173 57,450 64,221 57,100 ====== ====== ====== ====== Basic earnings per share $ .24 $ .19 $ .95 $.75 Diluted earnings per share $ .24 $ .19 $ .90 $.74
The effect of the assumed conversion of the 4.25% convertible debentures has been excluded from the calculation of EPS for the three months ended June 30, 2001 as the impact would be anti-dilutive. NOTE 4 - COMPREHENSIVE INCOME - ----------------------------- Comprehensive income for the quarters ended June 30, 2001 and June 30, 2000 was $4,053 and $6,729, respectively. Comprehensive income for the six months ended June 30, 2001 and June 30, 2000 was $25,208 and $34,857, respectively. Comprehensive income for all periods presented represents net income, changes in foreign currency translation adjustments and unrealized hedging gains and losses in accordance with FAS 133. NOTE 5 - BUSINESS ACQUISITIONS AND DIVESTITURES - ----------------------------------------------- On March 9, 2001, the Company purchased selected assets of LogoAthletic ("Logo") for $14.2 million. Included in the assets purchased were inventory, equipment, facility leases and the rights to Logo's trademarks. Since the acquisition was not material to the Company's consolidated results, no pro forma information is provided. Effective January 1, 2001, the Company increased its ownership share in one of its European subsidiaries and acquired majority ownership in one of its Latin America distributors. The impact of these events was not material to the consolidated financial statements. Effective January 1, 2001, the Company sold its interest in its South African subsidiary, which will now operate as an independent distributor. The sale price and historical operating results of the Company's South African subsidiary are not material to the consolidated financial results or consolidated financial position of the Company. NOTE 6 - CONVERTIBLE DEBENTURES - ------------------------------- On February 28, 2001 the Company sold $250.0 million in 20-Year Convertible Debentures in the 144A private placement market. The Convertible Debentures have an annual coupon rate of 4.25 %, payable in cash semi-annually. The Debentures are convertible into shares of Reebok common stock at a price of $38.56. The Company used the net proceeds to re-pay its existing term loan due August 31, 2002. NOTE 7 - CONTINGENCIES - ---------------------- The Company is involved in various legal proceedings generally incidental to its business. While it is not feasible to predict or determine the outcome of these proceedings, management does not believe that they should result in a materially adverse effect on the Company's financial position, results of operations or liquidity. REEBOK INTERNATIONAL LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with regard to the Company's revenues, earnings, spending, margins, cash flow, orders, inventory, products, actions, plans, strategies and objectives. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "will be," "will continue," "will result," "could," "may," "might," or any variations of such words or other words with similar meanings. Any such statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from those discussed in such forward-looking statements. Prospective information is based on management's then current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, become inaccurate. Risks and uncertainties that could affect the Company's actual results and could cause such results to differ materially from those contained in forward-looking statements made by or on behalf of the Company include, but are not limited to, the following: competition; shifts in consumer preferences; the ability to accurately forecast consumer demand and sales; the ability to sustain current pricing levels for the Company's products; the potential of the backlog report to not be indicative of future sales; the effect of the Company's investment in advertising, marketing, athlete endorsement, and athletic sponsorships; lower than anticipated sales and increased operating costs at the Company's retail outlet stores; international sales and manufacturing operations; import regulations, political instability or general economic factors in the international regions where the Company conducts its business; interruption or unavailability of sources of supply; increases in leather prices due to recent shortages of hides resulting from mad cow and foot-and-mouth disease epidemics in certain European countries; reliance on independent manufacturers; the ability to make timely payments on indebtedness; the ability to protect the Company's intellectual property rights; the ability to realize the full value of the Company's deferred tax assets; the ability to achieve the intended benefits from the restructuring of the Company's global operations including operating and logistical efficiencies in the areas of distribution and information systems; the effect a strong United States dollar may have on the Company's results of operations from its international business; and other factors mentioned or incorporated by reference in this report or other reports. This list of risk factors is not exhaustive. Other risks and uncertainties are discussed elsewhere in this report and in further detail under the caption entitled Issues and Uncertainties included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 which has been filed with the Securities and Exchange Commission. In addition, the Company operates in a highly competitive and rapidly changing environment. Therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on the Company's business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Operating Results - ----------------- Second Quarter 2001 Compared to Second Quarter 2000 - --------------------------------------------------- Net sales for the quarter ended June 30, 2001 were $711.0 million, a 3.8% increase from 2000's second quarter net sales of $685.1 million. Sales comparisons are being adversely affected by the weakening of most foreign currencies against the U.S. dollar. On a constant dollar basis, which eliminates the effect of currency fluctuations, net sales for the quarter ended June 30, 2001 increased $45.1 million or 6.8%. The Reebok Division's worldwide sales (including the sales of the Greg Norman Collection and NFL licensed product) were $588.9 million an 8.7% increase from constant dollar sales of $542.0 million in the second quarter of 2000. U.S. footwear sales of the Reebok Brand increased 1.0% to $250.3 million in the second quarter of 2001 from $247.8 million in the second quarter of 2000. During the quarter, U.S. footwear sales of the Reebok Brand were adversely impacted by the decrease in the Company's retail outlet sales which declined 5.9%. There were no significant changes in the number of retail outlet stores operated by the Company as compared to the prior year's period. The Company believes that this decrease was primarily the result of a very promotional retail climate in the U.S. This decline in the Company's retail outlet stores was more than offset by the increase in the Company's U.S wholesale footwear business. Also during the quarter, the Company increased its core fill-in business by almost 20%. This increase in the Company's fill-in business was generated through its automated replenishment program for certain core styles. U.S. footwear sales in many categories increased. The basketball category increased 10%, driven by the strong sell-through success of the Company's Iverson product at retail. The running category increased 39% and the Classics category increased 19% while the children's and cross-training categories decreased. U.S. apparel sales of the Reebok Division (including the sales of the Greg Norman Collection and NFL licensed product) increased in the second quarter by 56.3% to $81.9 million from $52.4 million in the second quarter of 2000. The increase from sales was primarily from sales of NFL licensed product. However, wholesale sales of Reebok branded apparel increased 13.1% as well. Some new apparel silhouettes with a strategic focus on women's fitness, Iverson and Classics have resulted in improving sales trends for Reebok branded apparel. The Company believes that with the addition of its new sports licensing products, U.S. apparel will be a growth business over the next several years. International sales of the Reebok Brand (including footwear and apparel) were $256.7 million in the second quarter of 2001, a decrease of 1.0% from sales of $259.4 million in the second quarter of 2000. However, the decrease is all due to currency fluctuations. On a constant dollar basis, international sales of the Reebok Brand increased $14.9 million or 6.2%. In constant dollars, net sales in Europe increased 7.8% as compared to the second quarter of 2000. During the second quarter of 2001 the Company launched its "Defy Convention" global brand campaign in Europe and increased its working media spend by 75% in the European market. These initiatives, together with the Company investing in retail presence in Europe, have helped to drive the sales increase. The Asia Pacific region reported a constant dollar sales decrease of 5.1% in the quarter. The Company believes that most of the decline can be attributed to the weak Japanese economy. In Latin America, the Company's sales to its independent distributors increased approximately 35% as these distributors increased their purchases to meet local consumer demand. International categories that generated sales increases in the second quarter of 2001 were running, walking, and classics. International categories that decreased in the second quarter of 2001 were men's cross-training and children's. In constant dollars, international footwear sales increased approximately 10.0%, and international apparel sales increased by approximately 1.0%. Effective January 1, 2001, the Company's South Africa subsidiary was sold and became an independent distributor and the Company purchased a majority interest in its Mexico distributor which was previously a joint venture. These changes did not have a material impact on net sales. Rockport's second quarter 2001 sales were $98.0 million, an increase of 1.2% from sales of $96.8 million in the second quarter of 2000. Domestic sales for the Rockport Brand decreased 1.2% whereas international sales increased 9.2% as compared to the second quarter of 2000. International revenues accounted for approximately 25% of Rockport's sales in the second quarter of 2001 as compared to 23% in the second quarter of 2000. The Company attributes the domestic sales decline to a weak retail climate in the U.S. Rockport's new product introductions were successful during the second quarter of 2001. However, core product did slow down in the quarter. Sales of the Company's Polo Ralph Lauren Footwear products were $24.1 million in the second quarter of 2001, a decrease of 16.0% from sales of $28.7 million in the second quarter of 2000. The decline is partially attributable to the weak department store business in the quarter and partially due to the re-aligning of the Company's product strategy to conform with that of Polo Ralph Lauren corporate.During 2001, the Company expects to expand the retail distribution of its Lauren and Polo Jeans footwear products and to concentrate its design efforts on developing key items that can become signatures for its various Ralph Lauren Footwear segments. The Company has entered into a new exclusive licensing agreement with the National Football League ("NFL") for apparel, footwear, equipment and accessories beginning with the 2002 season. In order to support this new license, in February 2001 the Company purchased selected assets of LogoAthletic ("Logo"). Included in the assets purchased were inventory, equipment, facility leases and the rights to Logo's trademarks. The total purchase price was $14.2 million. Under this new agreement, the NFL requested that the Company provide services during the transition year of 2001 and the Company has agreed to provide these services. In the first quarter of 2001, the Company began shipping Reebok branded NFL licensed products to retailers. The Company expects 2001 sales of NFL licensed products to be in the range of $75.0 to $125.0 million. During the second quarter of 2001, the Company's overall gross margin was 36.7% of sales compared to 38.2% for 2000's second quarter. The primary reasons for the decline in gross margin in the second quarter is the impact of the weakening of most foreign currencies against the U.S. dollar and the promotional nature of the U.S. retail environment. The promotional U.S. retail environment has resulted in lower maintained margins on closeout products. In addition, although hide prices for leather have improved recently, margins were somewhat impacted by increased leather prices in the quarter. The Company believes that based on current foreign exchange rates and the Company's hedging strategies, the gross margin percentage for the balance of the year will approximate that which was achieved in the second quarter of 2001. Selling, general and administrative expenses for the second quarter of 2001 were $227.6 million, or 32.0% of sales, as compared to $234.8 million, or 34.3% of sales in 2000's second quarter. The Company is investing in brand building initiatives but at the same time it is reducing general and administrative expenses. As part of its multi-brand strategy to streamline processes and improve execution, during the second quarter the Company relocated its Rockport Brand to its new corporate headquarters and integrated it into its Shared Services operation. The Company expects to continue to generate greater operating efficiencies for the balance of 2001, and as a result expects selling, general and administrative expenses to improve by approximately 150 basis points as a percentage of sales, for the full year as compared to the prior year. Net interest expense was $4.1 million for the second quarter of 2001, a decrease of $3.1 million as compared to the second quarter of 2000. The decrease was primarily a result of debt repayments and refinancings and the Company's cash position. Outstanding indebtedness has declined $70.7 million from June 30, 2000. For the second quarter of 2001, other income, net was a net expense of $7.1 million as compared to $2.0 million for the second quarter of 2000. During the second quarter of 2001, the Company identified an underaccrual of buying agent's commissions of approximately $10.6 million relating to 2001 and prior years. In the opinion of the Company, the amounts were not material to any of the previously reported quarterly or annual periods. Accordingly, the $10.6 million has been recorded in the current quarter in other expense. Also included in other expense is the cost incurred of $6.7 million for the integration and consolidation of the Company's brands into the Shared Service Center, a gain of $8.2 million from the sale of certain real estate assets as well as currency losses and the amortization of intangibles. The effective income tax rate was 31.0% in the second quarter of 2001 as compared to 37.7% in the second quarter of 2000. The reduction from the prior year is the result of the Company's international tax strategy and changes in the geographic mix of the total Company's earnings. The Company expects that the annual tax rate will be 31.0%. However, the rate could fluctuate depending on where the Company earns income geographically, and, if the Company incurs non-benefitable losses in certain jurisdictions, the rate could increase. First Six Months 2001 Compared to First Six Months 2000 - ------------------------------------------------------- Net sales for the six months ended June 30, 2001 were $1.481 billion, an increase of 1.8% from sales of $1.455 billion in the first six months of 2000. Sales comparisons are being adversely affected by the weakening of most foreign currencies against the U.S. dollar. On a constant dollar basis, which eliminates the effect of currency fluctuations, net sales for the six months ended June 30, 2001 increased $70.6 million or 5.0%. The Reebok Division's worldwide sales (including the sales of the Greg Norman Collection and NFL licensed product) were $1.231 billion a 6.1% increase from constant dollar sales of $1.160 billion in the first six months of 2000. U.S. footwear sales of the Reebok Brand increased 2.2% to $512.5 million in the first six months of 2001 from $501.4 million in the first six months of 2000. During the six months, U.S. footwear wholesale sales of the Reebok Brand were adversely affected by the decrease in the Company's retail outlet sales which declined 6.2%. There were no significant changes in the number of retail outlet stores operated by the Company as compared to the prior year's period. The Company believes that this decrease was primarily the result of a very promotional retail climate in the U.S. This decline in the Company's retail outlet stores was more than offset by the increase in the Company's U.S wholesale footwear business. U.S. footwear sales in many categories increased. The basketball category increased 21%, driven by the strong sell-through success of the Company's Iverson product at retail. The running category increased 22% and the Classics category increased 13% while the children's and cross-training categories decreased. U.S. apparel sales of the Reebok Division (including the sales of the Greg Norman Collection and NFL licensed product) increased in the first six months by 28.8% to $147.7 million from $114.7 million in the first six months of 2000. The increase from sales was primarily from sales of NFL licensed product. However, wholesale sales of Reebok branded apparel increased 6.7% as well. Some new apparel silhouettes with a strategic focus on women's fitness, Iverson and Classics have resulted in improving sales trends for Reebok branded apparel. The Company believes that with the addition of its new sports licensing products, U.S. apparel will be a growth business over the next several years. International sales of the Reebok Brand (including footwear and apparel) were $570.9 million in the first six months of 2001, a decrease of 2.4% from sales of $585.0 million in the first six months of 2000. However, the decrease is all due to currency fluctuations. On a constant dollar basis, international sales of the Reebok Brand increased $27.0 million or 5.0%. In constant dollars, net sales in Europe increased 6% as compared to the first six months of 2000. During the first six months of 2001 the Company launched its "Defy Convention" global brand campaign in Europe and increased its working media spend in the European market. These initiatives, together with the Company investing in retail presence in Europe, have helped to drive the sales increase. The Asia Pacific region reported a constant dollar sales increase of approximately .5% in the six months. In Latin America, the Company's sales to its independent distributors increased approximately 20% as these distributors increased their purchases to meet local consumer demand. International categories that generated sales increases in the first six months of 2001 were basketball, running, walking, and classics. International categories that decreased in the first six months of 2001 were men's cross-training and children's. In constant dollars, international footwear sales increased approximately 7.1%, and international apparel sales increased by approximately 2.1%. Effective January 1, 2001, the Company's South Africa subsidiary was sold and became an independent distributor and the Company purchased a majority interest in its Mexico distributor which was previously a joint venture. These changes did not have a material impact on net sales. Rockport's first six months 2001 sales were $199.0 million an increase of .6% from sales of $197.8 million in the first six months of 2000. Domestic sales for the Rockport Brand decreased .5% whereas international sales increased 3.9% as compared to the first six months of 2000. International revenues accounted for approximately 26% of Rockport's sales in the first six months of 2001 and 2000. The Company attributes the domestic sales decline to a weak retail climate in the U.S. Rockport's new product introductions were successful during the first six months of 2001. However, core product did slow down during this period. Sales of the Company's Polo Ralph Lauren Footwear products were $50.8 million in the first six months of 2001, a decrease of 9.3% from sales of $56.0 million in the first six months of 2000. The decline is partially attributable to the weak department store business in the period and partially due to the re-aligning of the Company's product strategy to conform with that of Polo Ralph Lauren corporate. During 2001, the Company expects to expand the retail distribution of its Lauren and Polo Jeans footwear products and to concentrate its design efforts on developing key items that can become signatures for its various Ralph Lauren Footwear segments. The Company entered into a new exclusive licensing agreement with the NFL for apparel, footwear, equipment and accessories beginning with the 2002 season. In order to support this new license, in February 2001 the Company purchased selected assets of LogoAthletic ("Logo"). Included in the assets purchased were inventory, equipment, facility leases and the rights to Logo's trademarks. The total purchase price was $14.2 million. Under this new agreement, the NFL requested that the Company provide services during the transition year of 2001 and the Company has agreed to provide these services. In the first six months of 2001, the Company began shipping Reebok branded NFL licensed products to retailers. The Company expects 2001 sales of NFL licensed products to be in the range of $75.0 to $125.0 million. During the first six months of 2001, the Company's overall gross margin was 37.0% of sales compared to 38.0% for 2000's first six months. The primary reasons for the decline in the in gross margin first six months is the impact of the weakening of most foreign currencies against the U.S. dollar and the promotional nature of the U.S. retail environment. The promotional U.S. retail environment has resulted in lower maintained margins on closeout products. In addition, although hide prices for leather have improved recently, margins were somewhat impacted by increased leather prices in the first six months. The Company believes that based on current foreign exchange rates and the Company's hedging strategies, the gross margin percentage for the balance of the year will approximate that which was achieved in the second quarter of 2001. Selling, general and administrative expenses for the first six months of 2001 were $451.0 million, or 30.5% of sales, as compared to $469.3 million, or 32.3% of sales in 2000's first six months. The Company is investing in brand building initiatives but at the same time it is reducing general and administrative expenses. As part of its multi-brand strategy to streamline processes and improve execution, during the second quarter, the Company relocated its Rockport Brand to its new corporate headquarters and integrated it into its Shared Services operation. The Company expects to continue to generate greater operating efficiencies for the balance of 2001, and as a result expects selling, general and administrative expenses to improve by approximately 150 basis points as a percentage of sales for the full year as compared to the prior year. Net interest expense was $8.1 million for the first six months of 2001, a decrease of $4.8 million as compared to the first six months of 2000. The decrease was primarily a result of debt repayments and refinancings and the Company's cash position. Outstanding indebtedness has declined $70.7 million from June 30, 2000. For the first six months of 2001, other income, net was a net expense of $5.7 million as compared to net income of $1.8 for the first six months of 2000. During the first six months of 2001, the Company identified an underaccrual of buying agent's commissions of approximately $10.6 million relating to 2001 and prior years. In the opinion of the Company, the amounts were not material to any of the previously reported quarterly or annual periods. Accordingly, the $10.6 million has been recorded in the first six months in other expense. Also included in other expense, is the cost incurred of $6.7 million for the integration and consolidation of the Company's brands into the Shared Service Center, a gain from the sale of certain real estate assets of $8.2. Also included in other expenses, are currency losses and the amortization of intangibles, as well as, the write-off of $5.2 million of unamortized debt costs associated with the early extinguishment of the Company's term loan. The effective income tax rate was 31.0% in the first six months of 2001 as compared to 37.7% in the first six months of 2000. The reduction from the prior year is the result of the Company's international tax strategy and changes in the geographic mix of the total Company's earnings. The Company expects that the annual tax rate will be 31.0%. However, the rate could fluctuate depending on where the Company earns income geographically, and, if the Company incurs non-benefitable losses in certain jurisdictions, the rate could increase. Reebok Brand Backlog of Open Orders - ----------------------------------- The Reebok Brand backlog (including Greg Norman Collection apparel) of open customer orders scheduled for delivery during the period July 1, 2001 through December 31, 2001 increased 12.3% as compared to the same period last year. On a constant dollar basis, worldwide Reebok Brand backlog increased 17.0%. The 2001 backlog includes NFL licensed product. U.S. backlog for the Reebok Brand, increased 22.6%. U.S. footwear backlog increased 3.8% and U.S. apparel backlog (including Greg Norman Collection apparel and the new NFL licensed apparel) increased 120.5% as compared to the same period last year. In reported dollars European backlog declined 1.9%, however, in constant dollars the European backlog increased 7.9%. In constant dollars, European footwear increased 9.2%, and European apparel increased 6.8%. Comparisons regarding orders scheduled for delivery for the period July 1 through December 31 are as follows for the Reebok Brand: Percentage Change 2001/2000 Reported Constant Dollars Dollars U.S.A. Footwear + 3.8% + 3.8% Apparel* +120.5% +120.5% Total Domestic + 22.6% + 22.6% Europe: Footwear - .7% + 9.2% Apparel - 2.9% + 6.8% Total Europe - 1.9% + 7.9% Total Reebok Brand: Footwear + 3.8% + 6.8% Apparel + 29.9% + 39.0% Total Reebok Brand + 12.3% + 17.0% o Includes NFL licensed apparel. Excluding this new business U.S. apparel backlog increased 12.0% These backlog comparisons are not necessarily indicative of future sales trends. Many customer orders are cancelable, sales by Company-owned retail outlet stores are not included in the backlog and can vary from year-to-year, many markets in Latin America and Asia Pacific are not included in the backlog since sales are made by independent distributors and the ratio of orders booked early to at-once shipments can vary from period to period. Liquidity and Sources of Capital - -------------------------------- At June 30, 2001, the Company's working capital was $795.9 million as compared with $636.2 million at June 30, 2000. The current ratio at June 30, 2001 was 2.6 to 1, as compared to 2.5 to 1 at December 31, 2000 and 2.1 to 1 at June 30, 2000. For the twelve months ended June 30, 2001, cash decreased $62.7 million, as the result of debt payments of approximately $81.3 million. On February 28, 2001 the Company sold $250.0 million of 20-year Convertible Debentures in the private placement market. The sale was completed with a coupon rate of 4.25%, payable in cash semi-annually. The Debentures are convertible into shares of Reebok Common Stock at a price of $38.56. The Company utilized the proceeds to pay off its outstanding term loan which would have become due during the remainder of 2001 and 2002. As a result, the Company's next significant scheduled debt repayment is not until September, 2005. Inventory increased by $69.4 million or 17.1% from June 30, 2000. The increase in inventory is to support the growing backlog trends in both the Company's U.S. and international businesses and is in line with the Company's plans. Approximately one-third of the increase relates to the new NFL licensing business. In addition, in order to take advantage of certain currency swings and hedging contracts the Company took ownership of European inventory slightly earlier than last year. The Company plans to bring inventories down in relation to its current comparisons during the remainder of the year. Accounts receivable increased by $30.8 million from June 30, 2000, an increase of 6.2%. Some of the increase is in relation to sales trends but some of the increase is due to an increase in the number of days sales outstanding in accounts receivable which the Company attributes to the economic slowdown in several countries including the U.S. Cash used for operations during the first six months of 2001 was $104.8 million, as compared to cash provided by operations of $55.0 million during the first six months of 2000. Cash used for investing activities was $11.9 million as a result of the Company's $14.2 million purchase of selected assets of LogoAthletic. Included in the assets purchased were inventory, equipment, facility leases and the rights to Logo's trademarks. The Company also increased its ownership in one of its European Distributors and purchased a majority interest in one of its Latin American Distributors, which had previously been a joint venture. This was offset by the proceeds of $18.1 million from the sale of certain assets. Capital expenditures for the six months ended June 30, 2001 were $11.1 million. Cash generated from operations during the balance of 2001, together with the Company's existing and available credit lines, other financial resources and ability to access capital markets given the Company's existing credit ratings, are expected to adequately finance the Company's current and planned 2001 cash requirements. However, the Company's actual experience may differ from the expectations set forth in the preceding sentence. Factors that might lead to a difference include, but are not limited to, the matters discussed above and under the caption entitled Issues and Uncertainties included in the Company's Annual Report on Form 10-K as well as future events that might have the effect of reducing the Company's available cash balances (such as unexpected operating losses or increased capital or other expenditures, as well as increases in the Company's inventory or accounts receivable) or future events that might reduce or eliminate the availability of external financial resources. PART II - OTHER INFORMATION Item 1 None Item 2 None Item 3 None Item 4 Submission of Matters to a Vote of Security-Holders - ------ --------------------------------------------------- The Company held its Annual Meeting of Shareholders on May 1, 2001. At the Annual Meeting: 1. Four Class II members of the Board of Directors were elected by shareholders with no abstentions or broker non-votes. Name of Director Votes For Votes Against Norman Axelrod 51,017,363 4,628,025 Paul R. Duncan 51,017,821 4,627,567 Richard G. Lesser 51,017,506 4,627,882 Deval L. Patrick 51,017,831 4,627,557 The terms of office for Paul B. Fireman, Thomas M. Ryan, Dorothy E. Puhy, Mannie L. Jackson, and Geoffrey Nunes as Directors of the Company continued after the Annual Meeting. 2. A proposal to approve the Company's Executive Performance Incentive Plan was passed by a vote of 44,475,325 For and 1,516,130 Against, with 139,039 Abstentions and 9,514,894 broker non-votes. 3. A proposal to approve the Company's 2001 Equity Incentive and Director Deferred Compensation Plan was passed by a vote of 25,775,833 For and 21,355,191 Against, with 39,917 Abstentions and 8,474,447 broker non-votes. Item 5 None Item 6 (a) Exhibits 10.58 Common Stock Warrant 1, granted as of May 24, 2001 by the Company to National Football League Properties, Inc., to purchase 800,000 shares of the Company's Common Stock at the purchase price of $27.06 per share. 10.59 Common Stock Warrant 2, granted as of May 24, 2001 by the Company to National Football League Properties, Inc., to purchase 800,000 shares of the Company's Common Stock at the purchase price of $27.06 per share. 10.60 Registration Rights Agreement, dated as of May 24,2001, between the Company and National Football League Properties, Inc. (b) Current Reports on Form 8-K The Company did not file any Current Reports on Form 8-K for the quarter ended June 30, 2001. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 15, 2001 REEBOK INTERNATIONAL LTD. BY: /s/ KENNETH WATCHMAKER ------------------------- Kenneth Watchmaker Executive Vice President and Chief Financial Officer EX-10 3 warrant1.txt COMMON STOCK WARRANTS Execution Copy These Warrants and any shares acquired upon the exercise of these Warrants have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while such a registration is in effect or pursuant to an exemption from registration under said Act. REEBOK INTERNATIONAL LTD. Common Stock Warrant 1 Canton, Massachusetts May 24, 2001 THIS CERTIFIES that, for value received, NATIONAL FOOTBALL LEAGUE PROPERTIES, INC., a California corporation ("NFLP" and, together with any successors and permitted assigns, the "Holder"), is the owner of 800,000 warrants (the "Warrants"), each to purchase from REEBOK INTERNATIONAL LTD., a Massachusetts corporation (the "Company"), one duly authorized, validly issued, fully paid and nonassessable share of Common Stock, par value $.01 per share (the "Common Stock"), of the Company at the purchase price per share of $27.06 (the "Initial Purchase Price"), all subject to the terms, conditions and adjustments set forth below in this Warrant. The Warrants shall be vested in full as of the date hereof, but shall only be exercisable in accordance with the terms hereof. Certain capitalized terms used herein are defined in Section 8 hereof. 1. EXERCISE OF WARRANTS. 1.1. Exercise. The Warrants evidenced hereby may be exercised by Holder, in whole or in part at any time and from time to time, during normal business hours on any Business Day during the applicable exercise period established in Sections 1.3 and 1.4 (the "Exercise Period") by surrender of this Warrant to the Company at its principal executive office, accompanied by a Notice of Exercise in substantially the form attached hereto as Exhibit A (or a reasonable facsimile thereof) (the "Notice of Exercise") duly executed by Holder and accompanied by payment pursuant to Section 1.7, in the amount (the "Exercise Price") obtained by multiplying (a) the number of Warrants designated in such Notice of Exercise by (b) the applicable Purchase Price, in each case as adjusted from time to time pursuant to Sections 2 and 3 hereof, and Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities and property, rights or other assets receivable upon exercise of such Warrants pursuant to the provisions of Section 3 hereof) determined as provided in Section 3 (the "Warrant Shares"). 1.2. Legal Right to Warrant Shares. Upon surrender of any Warrants with a duly executed Notice of Exercise together with payment of the Exercise Price for the Warrant Shares purchased, Holder shall be entitled to receive a certificate or certificates of Warrant Shares so purchased. The Company agrees that the Warrant Shares shall be deemed to have been issued to Holder as of the close of business on the date on which such Warrants shall have been surrendered together with the Notice of Exercise and payment of the Exercise Price and Holder shall be treated for all purposes as the holder of record of such Warrant Shares as of the close of business on such date; provided, however, that if Holder is subject to HSR Act filing requirements such Warrants will be deemed to have been exercised on the date immediately following the date of the expiration of all HSR Act Restrictions (as defined below). 1.3. Exercise of Warrants. Subject to the terms and conditions of this Warrant, the Warrants shall be exercisable upon and after April 1, 2007; provided, that (a) unless a Purchase Price Adjustment has occurred prior to such date, all of the Warrants shall be sooner exercisable upon and after the earliest to occur of (i) the achievement of the Roll-in Objective (as defined in the Omnibus License Agreement), (ii) the First Option Closing (as defined in the Option Agreement), (iii) immediately prior to a Change of Control, (iv) the termination of the Omnibus License Agreement by either OAG or Reebok pursuant to Section 21.4 thereof or (v) the termination of the Omnibus License Agreement by OAG pursuant to Section 21.5 thereof; and (b) if a Purchase Price Adjustment has occurred prior to the time the Warrants have become exercisable, then (i) the Warrants subject to such Purchase Price Adjustment shall be exercisable, at the Company's sole option, either (x) on March 31, 2012 or (y) on any Business Day during the ninety (90) day period beginning on the date of such Purchase Price Adjustment and (ii) all of the remaining Warrants shall be exercisable in full upon and after the date of such Purchase Price Adjustment. The Company shall promptly notify Holder of the achievement of the Roll-In Objective as set forth in Section 3.2 of the Omnibus License Agreement. 1.4. Expiration of Warrants. The Warrants shall no longer be exercisable at 5:00 P.M. (New York City time) on March 31, 2012 (the "Expiration Date"), subject to earlier expiration pursuant to Section 1.3(b), it being understood that such expiration of exercisability shall not affect Section 5. 1.5. Delivery of Stock Certificates, etc. Upon exercise of all or part of the Warrants in accordance with Section 1.1, the Company will as soon as reasonably possible, and in any event within three Business Days thereafter, at its expense (including the payment by it of any applicable federal, state or other issue or documentary taxes or similar governmental charges, except as provided in Section 1.6), (a) issue and deliver or cause the Company's transfer agent to issue and deliver, a certificate or certificates in the name of Holder (or any other Person designated by it, in which case Holder shall pay to the Company applicable transfer taxes) for the largest number of whole shares of Common Stock to which Holder shall be entitled upon such exercise, which Warrant Shares shall be duly authorized, validly issued, fully paid and nonassessable, plus, in lieu of any fractional share to which Holder would otherwise be entitled, cash in an amount equal to the same fraction of the closing sales price of the Company Common Stock on the Business Day next preceding the date of such exercise; and (b) deliver the Other Securities and property, rights or other assets receivable upon exercise of such Warrants pursuant to the provisions of Section 3 hereof, if any, or the proportionate part thereof if the Warrants are not exercised in whole. In case such exercise is in part only, the Company shall issue to Holder, by the time of issuance of the Warrant Shares in respect of such exercise, a new Warrant or Warrants of like tenor, dated the date hereof and calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of Warrants designated for exercise by Holder upon such exercise as provided in Section 1.1 hereof. 1.6. HSR Act. The Company hereby acknowledges that exercise of the Warrants by Holder may subject the Company and/or Holder to the filing requirements of the HSR Act and that Holder may be prevented from exercising the Warrants until the expiration or early termination of all waiting periods imposed by the HSR Act ("HSR Act Restrictions"). If on or before the Expiration Date Holder has sent notice of exercise to the Company and Holder has not been able to complete the exercise of the Warrants prior to the Expiration Date because of the HSR Act Restrictions, the Holder will be entitled to complete the process of exercising this Warrant in accordance with the procedures contained herein notwithstanding the fact that completion of the exercise of such Warrants would take place after the Expiration Date. In the event any exercise of the Warrants subjects the Company to the filing requirements of the HSR Act, the Company and the Holder will use all commercially reasonable efforts to make at the earliest practicable date any filings under the HSR Act required to be made by the Company or the Holder, as the case may be, to obtain early termination of the HSR Act Restrictions and to take any other actions in connection therewith which may be necessary or appropriate to permit the consummation of the exercise of the Warrants and the other transactions contemplated by this Warrant. NFLP and Reebok will each pay 50% of disbursements and fees under the HSR Act. In the event that an injunction has been obtained by any Governmental Authority preventing Holder from exercising the Warrants, (i) the parties hereto shall cooperate to seek to have such injunction removed and (ii) Holder shall not be obligated to complete the process of exercising this Warrant in accordance with the procedures contained herein until after such injunction has been removed, notwithstanding the fact that completion of the exercise of such Warrants would take place after the Expiration Date. 1.7 Payment for Warrant Shares. The Exercise Price shall be paid for as follows: (i) in cash or by certified check, bank draft or money order payable to the order of the Company, (ii) by wire transfer of immediately available funds to an account of the Company designated in writing to Holder, (iii) by a combination of the methods of clauses (i) and (ii) above; or (iv) by delivery of a properly executed notice with an undertaking by a broker to deliver promptly to the Company the Exercise Price upon exercise of the Warrants. 2. PURCHASE PRICE ADJUSTMENT. 2.1. NFLP Early Termination. In the event that prior to the Warrants becoming exercisable in accordance with Section 1.3, NFLP provides written notice to the Company in accordance with Section 21.3 of the Omnibus License Agreement that NFLP irrevocably elects to terminate the Omnibus License Agreement, then, at 5:00 p.m. on the date such notice from NFLP is delivered, the Purchase Price for each Warrant shall automatically increase to the Adjusted Purchase Price. 2.2. NFLP Termination. In the event that prior to the Warrants becoming exercisable in accordance with Section 1.3, NFLP provides written notice to the Company in accordance with Article 21.1 of the Omnibus License Agreement that NFLP irrevocably elects to terminate the Omnibus License Agreement, then, at 5:00 p.m. on the date such notice from NFLP is delivered, the Purchase Price for 400,000 of the Warrants shall be adjusted pursuant to this Section 2.1. 2.3. OAG Early Termination. In the event that prior to the Warrants becoming exercisable in accordance with Section 1.3, OAG provides written notice to the Company in accordance with Section 21.3 of the Omnibus License Agreement that OAG irrevocably elects to terminate the Omnibus License Agreement, then the Purchase Price applicable to the Warrants shall be as follows: (a) If NFLP irrevocably elects in writing in accordance with Section 21.3 of the Omnibus License Agreement that the termination of the Omnibus License Agreement shall become effective at the end of Fiscal Year 6 (as defined in the Omnibus License Agreement), then, at 5:00 p.m. on the date such notice from NFLP is delivered, the Purchase Price for each of the Warrants shall automatically increase to the Adjusted Purchase Price; (b) If NFLP irrevocably elects in writing in accordance with Section 21.3 of the Omnibus License Agreement that (i) the termination of the Omnibus License Agreement shall become effective at the end of Fiscal Year 7 and (ii) the terms of the Omnibus License Agreement shall be modified in accordance with Section 21.3 thereof to cause OAG's rights thereunder to become non-exclusive throughout Fiscal Year 7, then, at 5:00 p.m. on the date such notice from NFLP is delivered, the Purchase Price for 600,000 of the Warrants shall automatically increase to the Adjusted Purchase Price and the Purchase Price for the remaining Warrants shall not be affected; and (c) If (i) NFLP irrevocably elects in writing in accordance with Section 21.3 of the Omnibus License Agreement that the termination of the Omnibus License Agreement shall become effective at the end of Fiscal Year 7 and (ii) the terms of clause (b) above do not apply, then, at 5:00 p.m. on the License Termination Notice Date, the Purchase Price for 400,000 of the Warrants shall automatically increase to the Adjusted Purchase Price and the Purchase Price for the remaining Warrants shall not be affected. 2.4. OAG Termination. In the event that prior to the Warrants becoming exercisable in accordance with Section 1.3, OAG terminates the Omnibus License Agreement pursuant to Section 21.2 thereof, then, at 5:00 p.m. on the date of such termination, the Purchase Price for each Warrant shall automatically increase to the Adjusted Purchase Price. 3. ADJUSTMENT OF PURCHASE PRICE, THRESHOLD PRICE AND NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE. The number and kind of shares purchasable upon the exercise of Warrants and the Purchase Price and Threshold Price (as defined below) shall be subject to adjustment from time to time as follows: 3.1. Stock Splits, Combinations, etc. In case the Company shall hereafter (A) pay a dividend or make a distribution on its Common Stock in shares of its Common Stock, (B) subdivide its outstanding shares of Common Stock into a greater number of shares, or (C) combine its outstanding shares of Common Stock into a smaller number of shares, each of the Purchase Price and Threshold Price in effect immediately prior to such action shall be adjusted, or further adjusted, to the respective price (to the nearest whole cent) determined by dividing (i) an amount equal to the number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the Purchase Price or Threshold Price, as the case may be, as it existed immediately prior to such issuance, by (ii) the total number of shares of Common Stock outstanding immediately after such issuance. Upon each such adjustment in the Purchase Price, the number of shares issuable upon exercise of the Warrant shall be adjusted, or further adjusted, by dividing (x) the product of (i) the Purchase Price as it existed immediately prior to such issuance and (ii) the number of shares issuable upon exercise of the Warrant immediately prior to such issuance, by (y) the Purchase Price in effect immediately after such issuance. An adjustment made pursuant to this paragraph shall become effective immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. 3.2. Reclassification, Combinations, Mergers, etc. In case of any reclassification or change of outstanding shares of Common Stock issuable upon exercise of the Warrant (other than as set forth in Section 3.1 above and other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the then outstanding shares of Common Stock or other capital stock issuable upon exercise of the Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination)) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, then, as a condition of such reclassification, change, consolidation, merger, sale or conveyance, lawful and adequate provision shall be made such that Holder of each Warrant then outstanding shall have the right thereafter to receive on exercise of such Warrant the kind and amount of shares of stock and Other Securities and property, rights or other assets receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon exercise of such Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such provisions shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3. The above provisions of this Section 3.2 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. 3.3 Distributions with Respect to Common Stock. If, at any time or from time after the date of this Warrant, the Company shall distribute to all holders of Common Stock or Other Securities, without payment therefor, (i) securities, other than shares of Common Stock, or (ii) property, rights or other assets (other than cash dividends paid by the Company in the ordinary course), with respect to the Common Stock or Other Securities (other than as set forth in Section 3.1 or 3.2 above), then, in each such case, each Holder of a Warrant, upon exercise thereof, shall be entitled to receive the securities and properties, rights or other assets receivable upon such distribution by a holder of the number of shares of Common Stock or Other Securities issuable upon exercise of such Warrant immediately prior to such distribution. 3.4. Deferral of Certain Adjustments. No adjustment to the Purchase Price (including the related adjustment to the number of shares of Common Stock purchasable upon the exercise of each Warrant) shall be required hereunder unless such adjustment, together with other adjustments carried forward as provided below, would result in an increase or decrease of at least one percent of the Purchase Price; provided that any adjustments which by reason of this Section 3.4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. No adjustment need be made for a change in the par value of the Common Stock. 3.5. Other Adjustments. In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the holders of this Warrant shall become entitled to receive any securities, other than shares of Common Stock, or property, rights or other assets, with respect to the Common Stock or Other Securities, thereafter the number of such other securities so receivable upon exercise of the Warrants shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock or Other Securities contained in this Section 3. 3.6. Notice of Certain Transactions. If the Company takes any action that would require any adjustment or readjustment pursuant to this Section 3, the Company shall provide to the Holder such notices of record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, change, consolidation, merger, sale or conveyance or any other transaction requiring an adjustment or readjustment hereunder, as would be required to be sent to record holders of the Company's securities. 3.7. Other Similar Dilutive Events. In case any event shall occur as to which the provisions of this Section 3 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase and put rights represented by the Warrants in accordance with the essential intent and principles of such Section, then, in each such case, the Company shall make a good faith adjustment to the Purchase Price and the Threshold Price and the number of shares issuable upon exercise of the Warrant in accordance with the intent of this Section 3. 3.8. Notice of Adjustment. Upon the occurrence of each adjustment or readjustment pursuant to this Section 3 (including pursuant to Section 3.7), the Company shall promptly provide to Holder a written notice of such event and the computation of the adjustment or readjustment in accordance with the terms hereof. The Company shall provide Holder with a certificate from an officer of the Company briefly stating the facts requiring the adjustment or readjustment and the manner of computing such adjustment or readjustment. 3.9. Statement on Warrants. Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Warrants or the Purchase Price, Warrants theretofore or thereafter issued may continue to express the same number and kind of shares as are stated in the Warrants initially issuable pursuant to this Warrant. 4. REGISTRATION AND LISTING OF COMMON STOCK. The Warrant Shares shall constitute Registrable Securities (as such term is defined in the Registration Rights Agreement). Each Holder of Warrants shall be entitled to all of the benefits afforded to a holder of any such Registrable Securities under the Registration Rights Agreement and each such Holder, by its acceptance of this Warrant, agrees to be bound by and to comply with the terms and conditions of the Registration Rights Agreement applicable to such Holder as a holder of such Registrable Securities. The Company will use its best efforts to cause the Warrant Shares and Other Securities, when issued, to be listed on each securities exchange or quotation system on which securities of the same class are listed or traded. 5. PAYMENT AFTER MARCH 31, 2012. The Company agrees to pay to Holder, upon its request given within 180 days after the Expiration Date, $6.25 for each Warrant held by Holder which was not exercised prior to its expiration pursuant to Section 1 hereof, so long as such Warrant did not have a Purchase Price Adjustment (it being understood that if the Purchase Price of the Warrant increased pursuant to Section 2 hereof, Holder would not be entitled to receive any payment for such Warrant hereunder); provided, however, that the Company shall have no obligations under this Section 5 if (i) the closing sale price of the Common Stock on the NYSE (as reported by the Wall Street Journal) is greater than an amount equal to 102% of the Threshold Price for a period of 30 consecutive trading days (the "Trading Period") during the period from April 1, 2011 through March 31, 2012, (ii) the Holder was not prohibited by law during the Trading Period from fully exercising the Warrant and reselling the Warrant Shares receivable in connection therewith (other than restraints imposed by Securities Act and similar state statutes), including the lack of any necessary clearance or approval of any Governmental Authority, such as expiration or termination of the waiting period under the HSR Act, and (iii) the Shelf Registration Statement (as defined in the Registration Rights Agreement) was effective during the entire Trading Period, without any Suspension Event (as defined in the Registration Rights Agreement) or stop order in effect during such time and the Company was not in breach in any material respect of any material covenant under the Registration Rights Agreement during the Trading Period. 6. RESTRICTIONS ON TRANSFER. This Warrant and the rights hereunder shall not be assignable or transferable by the issuer or holder of this Warrant without the prior written consent of the other and any purported assignment or transfer without such consent shall be void and of no effect; provided, that NFLP may transfer its rights hereunder (a) to a nationally recognized financial institution or (b) to an NFLP Affiliate (as defined in the Option Agreement). 7. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, the number of shares of Common Stock of each class (or Other Securities) from time to time issuable upon exercise of all Warrants at the time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof, and not subject to preemptive rights. Issuance of this Warrant will constitute authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon any exercise of this Warrant. 8. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS. 8.1. Ownership of Warrants. The Company may treat the Person in whose name any Warrant is registered on the register kept at the principal offices of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. A Warrant, if properly assigned, may be exercised by a new Holder without a new Warrant first having been issued. 8.2. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the principal offices of the Company, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof. 8.3. Registration of Warrants. The Company shall number and register the Warrants in a register as they are issued and as they are transferred to any permitted transferee hereunder. 8.4. Certification with respect to Warrants. Upon the request of the Holder, the Company shall confirm to the Holder in writing (1) whether the Warrants are then exercisable and (2) if any Warrants have been subject to a Purchase Price Adjustment, and (3) whether all or any portion of the Warrants have expired in accordance with Section 1. 9. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: Adjusted Purchase Price: An amount equal to 400% of the Purchase Price ----------------------- in effect immediately prior to the purchase price adjustment occurring pursuant to Section 2. Business Day: Any day other than a Saturday or a Sunday or a day on ------------ which commercial banking institutions in Boston, Massachusetts or New York, New York are authorized by law to be closed. Any reference to "days" (unless Business Days are specified) shall mean calendar days. Change of Control: Any of the following events shall constitute a ----------------- change of control for purposes of this Agreement: (i) any Person (or a "group" (within the meaning of Section 13(d) of the Exchange Act)) who does not currently own directly or indirectly 10% or more of the combined voting power of the Company's outstanding securities becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 30% (or, if higher, the aggregate percentage of the combined voting power of the Company's then-outstanding securities held by or for the benefit of all Fireman Entities) of the combined voting power of the Company's then-outstanding securities, (ii) any Person (or a "group" (within the meaning of Section 13(d) of the Exchange Act)), other than a Fireman Entity, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 50% of the Company's then outstanding securities or voting securities, (iii) there is a change of control of the Company of a kind reported by the Company under Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act (or a similar item in a similar schedule or form), (iv) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter, or (v) individuals who, at the date hereof, constitute the Board of Directors (the "Continuing Directors") cease for any reason to constitute a majority thereof, provided, however, that any director who is not in office at the date hereof but whose election by the Board of Directors or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the date hereof or whose election or nomination for election was previously so approved shall be deemed to be a Continuing Director for purposes of this Agreement. Notwithstanding the foregoing provisions of this definition, a "Change of Control" will not be deemed to have occurred solely because of the acquisition of securities of the Company (or any reporting requirement under the Act relating thereto) by an employment benefit plan maintained by the Company for its employees. Commission: The Securities and Exchange Commission or any other ---------- federal agency at the time administering the Securities Act. Common Stock: As defined in the introduction to this Warrant, such term ------------ to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. Company: As defined in the introduction to this Warrant, such term to ------- include any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 3 hereof. Exchange Act: The Securities Exchange Act of 1934, or any similar ------------ federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Fireman Entity: Includes each of, and any combination of, Paul Fireman, -------------- each member of Mr. Fireman's immediate family, each trust or other estate planning entity established by Mr. Fireman, any entity controlled by Mr. Fireman, and any Person receiving shares from Mr. Fireman pursuant to will or intestacy. Governmental Authority: Any nation, state, county, city or political ---------------------- subdivision and any official, agency, arbitrator, authority, court, department, commission, board, bureau, instrumentality or governmental body of any thereof. HSR Act: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as ------- amended. Legal Requirement: Any constitution, act, statute, law, ordinance, ----------------- treaty, rule, regulation, by-law, license, permit, certification or authorization of any self-regulatory organization, licensing authority or official interpretation of, or any judgment, injunction, order, decision, decree, license, permit or authorization issued by, any Governmental Authority. NASD: The National Association of Securities Dealers, Inc. ---- NYSE: New York Stock Exchange, Inc. ---- OAG: Onfield Apparel Group, LLC, a Delaware limited liability company. --- Omnibus License Agreement: Omnibus License Agreement dated as of May 24, 2001 among the Company, OAG, NFLP and certain affiliates of NFLP, as from time to time in effect. Option Agreement: Option Agreement dated as of May 24, 2001 among the ---------------- Company, Reebok Onfield, LLC, a Delaware limited liability company, OAG and NFLP, as from time to time in effect. Other Securities: Any stock (other than Common Stock) and other ---------------- securities of the Company or any other person (corporate or otherwise) which Holder at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 3 hereof or otherwise. Person: A corporation, an association, a partnership, a limited ------ liability company, an organization, a business, an individual, legal entity, a government or political subdivision thereof or a governmental agency. Purchase Price: The purchase price shall initially be the Initial -------------- Purchase Price, and shall be adjusted from time to time pursuant to Section 2 and 3 of this Agreement. Purchase Price Adjustment: Shall be deemed to occur with respect to any ------------------------- particular Warrant if the Purchase Price of such Warrant shall have increased to the Adjusted Purchase Price pursuant to Section 2. Registration Rights Agreement: The Registration Rights Agreement ------------------------------ dated as of May 24, 2001 between the Company and NFLP, as from time to time in effect. Securities Act: The Securities Act of 1933, or any similar federal --------------- statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Threshold Price: The threshold price shall initially be $33.31, and --------------- shall be adjusted from time to time pursuant to Section 3 of this Agreement. Warrants: As defined in the introduction to this Warrant. -------- 10. REMEDIES. The Company stipulates that the remedies at law of Holder in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 11. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as conferring upon Holder any rights as a stockholder of the Company or as imposing any obligation on Holder to purchase any securities or as imposing any liabilities on Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 12. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by facsimile, courier services or personal delivery to the following addresses, or to such other addresses as shall be designated from time to time by a party in accordance with this Section 12: (a) if to NFLP: National Football League Properties, Inc. 280 Park Avenue New York, New York 10017 Attention: Gary Gertzog, Esq. Facsimile No.: (212) 681-7599 with a copy to: Covington & Burling 1330 Avenue of the Americas New York, New York 10019 Attention: J. D. Weinberg, Esq. Facsimile No.: (212) 841-1010 (b) if to Reebok: Reebok International, Ltd. 1895 J.W. Foster Boulevard Canton, Massachusetts 02021 Attention: David A. Pace, Esq. Facsimile No.: (781) 401-4780 with a copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Attention: Keith F. Higgins, Esq. Facsimile No.: (617) 951-7050 All notices and communications under this Warrant shall be deemed to have been duly given (i) when delivered by hand, if personally delivered, (ii) when delivered to a courier, if delivered by commercial overnight courier service, (iii) when receipt is acknowledged, if sent by facsimile. 13. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof. 14. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of Common Stock issuable upon the exercise of this Warrant above the Purchase Price and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon any exercise of this Warrant. 15. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 16. JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR TRANSACTIONS CONTEMPLATED HEREBY MUST BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY, OF THE COMMONWEALTH OF MASSACHUSETTS LOCATED IN BOSTON, MASSACHUSETTS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE DISTRICT OF MASSACHUSETTS: BOSTON AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 12. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. REEBOK INTERNATIONAL LTD. /s/ Paul B. Fireman By: --------------------------- Name: Paul B. Fireman Title: Chairman and Chief Executive Officer ANNEX A FORM OF NOTICE OF EXERCISE [To be executed only upon exercise of Warrant] To REEBOK INTERNATIONAL LTD. The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, the Common Stock of within-named Company, as provided for therein, and (check the applicable box): / / Tenders herewith payment of the exercise price in full in the form of cash or a certified or official bank check in same-day funds in the amount of $____________ for _________ such Common Stock. / / Tenders payment of the exercise price in full by wire transfer of immediately available funds to an account of the Company designated in writing to Holder in the amount of $____________ for _________ such Common Stock. / / Tenders payment of the exercise price through a broker commitment pursuant to Section 1.7(iv). Please issue a certificate or certificates for such securities in the name of, and pay any cash for any fractional share to (please print name, address and social security number): Name: ________________________________ Address: ________________________________ Signature: ________________________________ Note: The above signature should correspond exactly with the name on the first page of this Warrant or with the name of the assignee appearing in the assignment form below. If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher whole number of shares. ANNEX B FORM OF ASSIGNMENT [To be signed only upon Assignment] To REEBOK INTERNATIONAL LTD. For value received, the undersigned hereby sells, assigns and transfers unto ___________________ the within Warrant, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises: NAME(s) OF ASSIGNEE(s) ADDRESS # OF WARRANTS And if said number of Warrants shall not be all the Warrants represented by the Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant. Dated: ----------------------------------------------- Signature: ------------------------------------------- Notice: The signature to the foregoing Assignment must correspond to the name as written upon the face of this security in every particular, without alteration or any change whatsoever. EX-10 4 warrant2.txt COMMON STOCK WARRANTS Execution Copy These Warrants and any shares acquired upon the exercise of these Warrants have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while such a registration is in effect or pursuant to an exemption from registration under said Act. REEBOK INTERNATIONAL LTD. Common Stock Warrant 2 Canton, Massachusetts May 24, 2001 THIS CERTIFIES that, for value received, NATIONAL FOOTBALL LEAGUE PROPERTIES, INC., a California corporation ("NFLP" and, together with any successors and permitted assigns, the "Holder"), is the owner of 800,000 warrants (the "Warrants"), each to purchase from REEBOK INTERNATIONAL LTD., a Massachusetts corporation (the "Company"), one duly authorized, validly issued, fully paid and nonassessable share of Common Stock, par value $.01 per share (the "Common Stock"), of the Company at the purchase price per share of $27.06 (the "Initial Purchase Price"), all subject to the terms, conditions and adjustments set forth below in this Warrant. The Warrants shall be vested in full as of the date hereof, but shall only be exercisable in accordance with the terms hereof. Certain capitalized terms used herein are defined in Section 8 hereof. 1. EXERCISE OF WARRANTS. 1.1. Exercise. The Warrants evidenced hereby may be exercised by Holder, in whole or in part at any time and from time to time, during normal business hours on any Business Day during the applicable exercise period established in Sections 1.3 and 1.4 (the "Exercise Period") by surrender of this Warrant to the Company at its principal executive office, accompanied by a Notice of Exercise in substantially the form attached hereto as Exhibit A (or a reasonable facsimile thereof) (the "Notice of Exercise") duly executed by Holder and accompanied by payment pursuant to Section 1.7, in the amount (the "Exercise Price") obtained by multiplying (a) the number of Warrants designated in such Notice of Exercise by (b) the applicable Purchase Price, in each case as adjusted from time to time pursuant to Sections 2 and 3 hereof, and Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities and property, rights or other assets receivable upon exercise of such Warrants pursuant to the provisions of Section 3 hereof) determined as provided in Section 3 (the "Warrant Shares"). 1.2. Legal Right to Warrant Shares. Upon surrender of any Warrants with a duly executed Notice of Exercise together with payment of the Exercise Price for the Warrant Shares purchased, Holder shall be entitled to receive a certificate or certificates of Warrant Shares so purchased. The Company agrees that the Warrant Shares shall be deemed to have been issued to Holder as of the close of business on the date on which such Warrants shall have been surrendered together with the Notice of Exercise and payment of the Exercise Price and Holder shall be treated for all purposes as the holder of record of such Warrant Shares as of the close of business on such date; provided, however, that if Holder is subject to HSR Act filing requirements such Warrants will be deemed to have been exercised on the date immediately following the date of the expiration of all HSR Act Restrictions (as defined below). 1.3. Exercise of Warrants. Subject to the terms and conditions of this Warrant, the Warrants shall be exercisable upon the earlier to occur of: (a) unless a Purchase Price Adjustment has occurred prior to such date, the date of theachievement of the Roll-in Objective (as defined in the Omnibus License Agreement); and (b) if a Purchase Price Adjustment has occurred prior to the time the Warrants have become exercisable, then the Warrants subject to such Purchase Price Adjustment shall be exercisable, at the Company's sole option, either (x) on March 31, 2012 or (y) on any Business Day during the ninety (90) day period beginning on the date of such Purchase Price Adjustment. The Company shall promptly notify Holder of the achievement of the Roll-In Objective as set forth in Section 3.2 of the Omnibus License Agreement. 1.4. Expiration of Warrants. The Warrants shall no longer be exercisable at 5:00 P.M. (New York City time) on March 31, 2012 (the "Expiration Date"), subject to earlier expiration pursuant to Section 1.3(b), it being understood that such expiration of exercisability shall not affect Section 5. 1.5. Delivery of Stock Certificates, etc. Upon exercise of all or part of the Warrants in accordance with Section 1.1, the Company will as soon as reasonably possible, and in any event within three Business Days thereafter, at its expense (including the payment by it of any applicable federal, state or other issue or documentary taxes or similar governmental charges, except as provided in Section 1.6), (a) issue and deliver or cause the Company's transfer agent to issue and deliver, a certificate or certificates in the name of Holder (or any other Person designated by it, in which case Holder shall pay to the Company applicable transfer taxes) for the largest number of whole shares of Common Stock to which Holder shall be entitled upon such exercise, which Warrant Shares shall be duly authorized, validly issued, fully paid and nonassessable, plus, in lieu of any fractional share to which Holder would otherwise be entitled, cash in an amount equal to the same fraction of the closing sales price of the Company Common Stock on the Business Day next preceding the date of such exercise; and (b) deliver the Other Securities and property, rights or other assets receivable upon exercise of such Warrants pursuant to the provisions of Section 3 hereof, if any, or the proportionate part thereof if the Warrants are not exercised in whole. In case such exercise is in part only, the Company shall issue to Holder, by the time of issuance of the Warrant Shares in respect of such exercise, a new Warrant or Warrants of like tenor, dated the date hereof and calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of Warrants designated for exercise by Holder upon such exercise as provided in Section 1.1 hereof. 1.6. HSR Act. The Company hereby acknowledges that exercise of the Warrants by Holder may subject the Company and/or Holder to the filing requirements of the HSR Act and that Holder may be prevented from exercising the Warrants until the expiration or early termination of all waiting periods imposed by the HSR Act ("HSR Act Restrictions"). If on or before the Expiration Date Holder has sent notice of exercise to the Company and Holder has not been able to complete the exercise of the Warrants prior to the Expiration Date because of the HSR Act Restrictions, the Holder will be entitled to complete the process of exercising this Warrant in accordance with the procedures contained herein notwithstanding the fact that completion of the exercise of such Warrants would take place after the Expiration Date. In the event any exercise of the Warrants subjects the Company to the filing requirements of the HSR Act, the Company and the Holder will use all commercially reasonable efforts to make at the earliest practicable date any filings under the HSR Act required to be made by the Company or the Holder, as the case may be, to obtain early termination of the HSR Act Restrictions and to take any other actions in connection therewith which may be necessary or appropriate to permit the consummation of the exercise of the Warrants and the other transactions contemplated by this Warrant. NFLP and Reebok will each pay 50% of disbursements and fees under the HSR Act. In the event that an injunction has been obtained by any Governmental Authority preventing Holder from exercising the Warrants, (i) the parties hereto shall cooperate to seek to have such injunction removed and (ii) Holder shall not be obligated to complete the process of exercising this Warrant in accordance with the procedures contained herein until after such injunction has been removed, notwithstanding the fact that completion of the exercise of such Warrants would take place after the Expiration Date. 1.7. Payment for Warrant Shares. The Exercise Price shall be paid for as follows: (i) in cash or by certified check, bank draft or money order payable to the order of the Company, (ii) by wire transfer of immediately available funds to an account of the Company designated in writing to Holder, (iii) by a combination of the methods of clauses (i) and (ii) above; or (iv) by delivery of a properly executed notice with an undertaking by a broker to deliver promptly to the Company the Exercise Price upon exercise of the Warrants. 2. PURCHASE PRICE ADJUSTMENT. 2.1. Omnibus License Termination. In the event that prior to the Warrants becoming exercisable in accordance with Section 1.3, NFLP or OAG terminates the Omnibus License Agreement, the Purchase Price for each Warrant shall automatically increase to the Adjusted Purchase Price. 2.2. Roll-In Objective Determination. Unless the Warrant shall already be exercisable, the Purchase Price for each Warrant shall automatically increase to the Adjusted Purchase Price on the date that NFLP and Reebok agree in writing (or, if NFLP and Reebok fail to agree, the date of a final and binding determination) that the Roll-In Objective was not achieved at any time prior to and including April 1, 2006. 3. ADJUSTMENT OF PURCHASE PRICE, THRESHOLD PRICE AND NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE. The number and kind of shares purchasable upon the exercise of Warrants and the Purchase Price and Threshold Price (as defined below) shall be subject to adjustment from time to time as follows: 3.1. Stock Splits, Combinations, etc. In case the Company shall hereafter (A) pay a dividend or make a distribution on its Common Stock in shares of its Common Stock, (B) subdivide its outstanding shares of Common Stock into a greater number of shares, or (C) combine its outstanding shares of Common Stock into a smaller number of shares, each of the Purchase Price and Threshold Price in effect immediately prior to such action shall be adjusted, or further adjusted, to the respective price (to the nearest whole cent) determined by dividing (i) an amount equal to the number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the Purchase Price or Threshold Price, as the case may be, as it existed immediately prior to such issuance, by (ii) the total number of shares of Common Stock outstanding immediately after such issuance. Upon each such adjustment in the Purchase Price, the number of shares issuable upon exercise of the Warrant shall be adjusted, or further adjusted, by dividing (x) the product of (i) the Purchase Price as it existed immediately prior to such issuance and (ii) the number of shares issuable upon exercise of the Warrant immediately prior to such issuance, by (y) the Purchase Price in effect immediately after such issuance. An adjustment made pursuant to this paragraph shall become effective immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. 3.2. Reclassification, Combinations, Mergers, etc. In case of any reclassification or change of outstanding shares of Common Stock issuable upon exercise of the Warrant (other than as set forth in Section 3.1 above and other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the then outstanding shares of Common Stock or other capital stock issuable upon exercise of the Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination)) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, then, as a condition of such reclassification, change, consolidation, merger, sale or conveyance, lawful and adequate provision shall be made such that Holder of each Warrant then outstanding shall have the right thereafter to receive on exercise of such Warrant the kind and amount of shares of stock and Other Securities and property, rights or other assets receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon exercise of such Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such provisions shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 3. The above provisions of this Section 3.2 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. 3.3. Distributions with Respect to Common Stock. If, at any time or from time after the date of this Warrant, the Company shall distribute to all holders of Common Stock or Other Securities, without payment therefor, (i) securities, other than shares of Common Stock, or (ii) property, rights or other assets (other than cash dividends paid by the Company in the ordinary course), with respect to the Common Stock or Other Securities (other than as set forth in Section 3.1 or 3.2 above), then, in each such case, each Holder of a Warrant, upon exercise thereof, shall be entitled to receive the securities and properties, rights or other assets receivable upon such distribution by a holder of the number of shares of Common Stock or Other Securities issuable upon exercise of such Warrant immediately prior to such distribution. 3.4. Deferral of Certain Adjustments. No adjustment to the Purchase Price (including the related adjustment to the number of shares of Common Stock purchasable upon the exercise of each Warrant) shall be required hereunder unless such adjustment, together with other adjustments carried forward as provided below, would result in an increase or decrease of at least one percent of the Purchase Price; provided that any adjustments which by reason of this Section 3.4 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. No adjustment need be made for a change in the par value of the Common Stock. 3.5. Other Adjustments. In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the holders of this Warrant shall become entitled to receive any securities, other than shares of Common Stock, or property, rights or other assets, with respect to the Common Stock or Other Securities, thereafter the number of such other securities so receivable upon exercise of the Warrants shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock or Other Securities contained in this Section 3. 3.6. Notice of Certain Transactions. If the Company takes any action that would require any adjustment or readjustment pursuant to this Section 3, the Company shall provide to the Holder such notices of record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, change, consolidation, merger, sale or conveyance or any other transaction requiring an adjustment or readjustment hereunder, as would be required to be sent to record holders of the Company's securities. 3.7. Other Similar Dilutive Events. In case any event shall occur as to which the provisions of this Section 3 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase and put rights represented by the Warrants in accordance with the essential intent and principles of such Section, then, in each such case, the Company shall make a good faith adjustment to the Purchase Price and the Threshold Price and the number of shares issuable upon exercise of the Warrant in accordance with the intent of this Section 3. 3.8. Notice of Adjustment. Upon the occurrence of each adjustment or readjustment pursuant to this Section 3 (including pursuant to Section 3.7), the Company shall promptly provide to Holder a written notice of such event and the computation of the adjustment or readjustment in accordance with the terms hereof. The Company shall provide Holder with a certificate from an officer of the Company briefly stating the facts requiring the adjustment or readjustment and the manner of computing such adjustment or readjustment. 3.9. Statement on Warrants. Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Warrants or the Purchase Price, Warrants theretofore or thereafter issued may continue to express the same number and kind of shares as are stated in the Warrants initially issuable pursuant to this Warrant. 4. REGISTRATION AND LISTING OF COMMON STOCK. The Warrant Shares shall constitute Registrable Securities (as such term is defined in the Registration Rights Agreement). Each Holder of Warrants shall be entitled to all of the benefits afforded to a holder of any such Registrable Securities under the Registration Rights Agreement and each such Holder, by its acceptance of this Warrant, agrees to be bound by and to comply with the terms and conditions of the Registration Rights Agreement applicable to such Holder as a holder of such Registrable Securities. The Company will use its best efforts to cause the Warrant Shares and Other Securities, when issued, to be listed on each securities exchange or quotation system on which securities of the same class are listed or traded. 5. PAYMENT AFTER MARCH 31, 2012. The Company agrees to pay to Holder, upon its request given within 180 days after the Expiration Date, $6.25 for each Warrant held by Holder which was not exercised prior to its expiration pursuant to Section 1 hereof, so long as such Warrant did not have a Purchase Price Adjustment (it being understood that if the Purchase Price of the Warrant increased pursuant to Section 2 hereof, Holder would not be entitled to receive any payment for such Warrant hereunder); provided, however, that the Company shall have no obligations under this Section 5 if (i) the closing sale price of the Common Stock on the NYSE (as reported by the Wall Street Journal) is greater than an amount equal to 102% of the Threshold Price for a period of 30 consecutive trading days (the "Trading Period") during the period from May 1, 2011 through March 31, 2012, (ii) the Holder was not prohibited by law during the Trading Period from fully exercising the Warrant and reselling the Warrant Shares receivable in connection therewith (other than restraints imposed by Securities Act and similar state statutes), including the lack of any necessary clearance or approval of any Governmental Authority, such as expiration or termination of the waiting period under the HSR Act, and (iii) the Shelf Registration Statement (as defined in the Registration Rights Agreement) was effective during the entire Trading Period, without any Suspension Event (as defined in the Registration Rights Agreement) or stop order in effect during such time and the Company was not in breach in any material respect of any material covenant under the Registration Rights Agreement during the Trading Period. 6. RESTRICTIONS ON TRANSFER. This Warrant and the rights hereunder shall not be assignable or transferable by the issuer or holder of this Warrant without the prior written consent of the other and any purported assignment or transfer without such consent shall be void and of no effect; provided, that NFLP may transfer its rights hereunder (a) to a nationally recognized financial institution or (b) to an NFLP Affiliate (as defined in the Option Agreement). 7. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, the number of shares of Common Stock of each class (or Other Securities) from time to time issuable upon exercise of all Warrants at the time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof, and not subject to preemptive rights. Issuance of this Warrant will constitute authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon any exercise of this Warrant. 8. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS. 8.1. Ownership of Warrants. The Company may treat the Person in whose name any Warrant is registered on the register kept at the principal offices of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. A Warrant, if properly assigned, may be exercised by a new Holder without a new Warrant first having been issued. 8.2. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the principal offices of the Company, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof. 8.3. Registration of Warrants. The Company shall number and register the Warrants in a register as they are issued and as they are transferred to any permitted transferee hereunder. 8.4. Certification with respect to Warrants. Upon the request of the Holder, the Company shall confirm to the Holder in writing (1) whether the Warrants are then exercisable and (2) if any Warrants have been subject to a Purchase Price Adjustment, and (3) whether all or any portion of the Warrants have expired in accordance with Section 1. 9. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: Adjusted Purchase Price: An amount equal to 400% of the Purchase Price ----------------------- in effect immediately prior to the purchase price adjustment occurring pursuant to Section 2. Business Day: Any day other than a Saturday or a Sunday or a day on ------------ which commercial banking institutions in Boston, Massachusetts or New York, New York are authorized by law to be closed. Any reference to "days" (unless Business Days are specified) shall mean calendar days. Commission: The Securities and Exchange Commission or any ---------- other federal agency at the time administering the Securities Act. Common Stock: As defined in the introduction to this Warrant, such term ------------ to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. Company: As defined in the introduction to this Warrant, such term to ------- include any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 3 hereof. Exchange Act: The Securities Exchange Act of 1934, or any similar ------------ federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Governmental Authority: Any nation, state, county, city or political ---------------------- subdivision and any official, agency, arbitrator, authority, court, department, commission, board, bureau, instrumentality or governmental body of any thereof. HSR Act: The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as ------- amended. Legal Requirement: Any constitution, act, statute, law, ordinance, ----------------- treaty, rule, regulation, by-law, license, permit, certification or authorization of any self-regulatory organization, licensing authority or official interpretation of, or any judgment, injunction, order, decision, decree, license, permit or authorization issued by, any Governmental Authority. NASD: The National Association of Securities Dealers, Inc. ---- NYSE: New York Stock Exchange, Inc. ---- OAG: Onfield Apparel Group, LLC, a Delaware limited liability company. --- Omnibus License Agreement: Omnibus License Agreement dated as of May ------------------------- 24, 2001 among the Company, OAG, NFLP and certain affiliates of NFLP, as from time to time in effect. Option Agreement: Option Agreement dated as of May 24, 2001 among the ---------------- Company, Reebok Onfield, LLC, a Delaware limited liability company, OAG and NFLP, as from time to time in effect. Other Securities: Any stock (other than Common Stock) and other ---------------- securities of the Company or any other person (corporate or otherwise) which Holder at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 3 hereof or otherwise. Person: A corporation, an association, a partnership, a limited ------ liability company, an organization, a business, an individual, legal entity, a government or political subdivision thereof or a governmental agency. Purchase Price: The purchase price shall initially be the Initial -------------- Purchase Price, and shall be adjusted from time to time pursuant to Section 2 and 3 of this Agreement. Purchase Price Adjustment: Shall be deemed to occur with respect to any ------------------------- particular Warrant if the Purchase Price of such Warrant shall have increased to the Adjusted Purchase Price pursuant to Section 2. Registration Rights Agreement: The Registration Rights Agreement ------------------------------- dated as of May 24, 2001 between the Company and NFLP, as from time to time in effect. Securities Act: The Securities Act of 1933, or any similar --------------- federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Threshold Price: The threshold price shall initially be $33.31, and --------------- shall be adjusted from time to time pursuant to Section 3 of this Agreement. Warrants: As defined in the introduction to this Warrant. -------- 10. REMEDIES. The Company stipulates that the remedies at law of Holder in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 11. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as conferring upon Holder any rights as a stockholder of the Company or as imposing any obligation on Holder to purchase any securities or as imposing any liabilities on Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 12. NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by facsimile, courier services or personal delivery to the following addresses, or to such other addresses as shall be designated from time to time by a party in accordance with this Section 12: (a) if to NFLP: National Football League Properties, Inc. 280 Park Avenue New York, New York 10017 Attention: Gary Gertzog, Esq. Facsimile No.: (212) 681-7599 with a copy to: Covington & Burling 1330 Avenue of the Americas New York, New York 10019 Attention: J. D. Weinberg, Esq. Facsimile No.: (212) 841-1010 (b) if to Reebok: Reebok International, Ltd. 1895 J.W. Foster Boulevard Canton, Massachusetts 02021 Attention: David A. Pace, Esq. Facsimile No.: (781) 401-4780 with a copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Attention: Keith F. Higgins, Esq. Facsimile No.: (617) 951-7050 All notices and communications under this Warrant shall be deemed to have been duly given (i) when delivered by hand, if personally delivered, (ii) when delivered to a courier, if delivered by commercial overnight courier service, (iii) when receipt is acknowledged, if sent by facsimile. 13. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof. 14. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of Common Stock issuable upon the exercise of this Warrant above the Purchase Price and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon any exercise of this Warrant. 15. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 16. JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR TRANSACTIONS CONTEMPLATED HEREBY MUST BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY, OF THE COMMONWEALTH OF MASSACHUSETTS LOCATED IN BOSTON, MASSACHUSETTS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE DISTRICT OF MASSACHUSETTS: BOSTON AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 12. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. REEBOK INTERNATIONAL LTD. By: /s/ Paul B. Fireman ------------------------------ Name:Paul B. Fireman Title:Chairman and Chief Executive Officer ANNEX A FORM OF NOTICE OF EXERCISE [To be executed only upon exercise of Warrant] To REEBOK INTERNATIONAL LTD. The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, the Common Stock of within-named Company, as provided for therein, and (check the applicable box): / / Tenders herewith payment of the exercise price in full in the form of cash or a certified or official bank check in same-day funds in the amount of $____________ for _________ such Common Stock. / / Tenders payment of the exercise price in full by wire transfer of immediately available funds to an account of the Company designated in writing to Holder in the amount of $____________ for _________ such Common Stock. / / Tenders payment of the exercise price through a broker commitment pursuant to Section 1.7(iv). Please issue a certificate or certificates for such securities in the name of, and pay any cash for any fractional share to (please print name, address and social security number): Name: ________________________________ Address: ________________________________ Signature: ________________________________ Note: The above signature should correspond exactly with the name on the first page of this Warrant or with the name of the assignee appearing in the assignment form below. If said number of shares shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher whole number of shares. ANNEX B FORM OF ASSIGNMENT [To be signed only upon Assignment] To REEBOK INTERNATIONAL LTD. For value received, the undersigned hereby sells, assigns and transfers unto ___________________ the within Warrant, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises: NAME(s) OF ASSIGNEE(s) ADDRESS # OF WARRANTS And if said number of Warrants shall not be all the Warrants represented by the Warrant, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant. Dated: ----------------------------------------------- Signature: ------------------------------------------- Notice: The signature to the foregoing Assignment must correspond to the name as written upon the face of this security in every particular, without alteration or any change whatsoever. EX-10 5 registrationrights.txt REGISTRATION RIGHTS AGREEMENT Execution Copy REGISTRATION RIGHTS AGREEMENT This Agreement (the "Agreement") is made as of May 24, 2001 between Reebok International, Ltd., a Massachusetts corporation (the "Company"), and National Football League Properties, Inc., a California corporation ("NFLP"). WHEREAS, in connection with certain licensing arrangements among NFLP, the Company and Onfield Apparel Group, LLC, a Delaware limited liability company whose interests are held by the Company and a wholly owned subsidiary of the Company ("OAG"), the Company has issued to NFLP two warrants, one of which is to purchase up to 800,000 shares of the Company's common stock, par value $.01 per share ("Common Stock"), subject to and in accordance with Common Stock Warrant 1 of the Company dated May 24, 2001 ("Warrant 1"), and the second of which is to purchase 800,000 shares of Company Common Stock subject to and in accordance the Common Stock Warrant 2 of the Company dated May 24, 2001 ("Warrant 2" and together with Warrant 1, the "Warrants"); WHEREAS, the Company and NFLP wish to provide certain arrangements with respect to the registration of the Common Stock issuable upon exercise of the Warrants, and the resale thereof, under the Securities Act. NOW, THEREFORE, in consideration of the mutual promises and obligations contained herein, the parties agree as follows: 1. Definitions. ----------- 1.1. "Board of Directors Full Suspension Event" means that both of the following shall have occurred: (i) the good faith determination of the Executive Committee of the Board of Directors of the Company that the disclosure of a pending material corporate development or transaction of the Company would have a material adverse effect on such corporate development or transaction and (ii) in connection with any such pending material corporate development or transaction, Reebok shall have instituted a "black-out period" under its insider trading policy with respect to sales by its officers and directors. 1.2. "Board of Directors Interim Suspension Event" means the good faith determination of the Executive Committee of the Board of Directors of the Company that the disclosure of pending material corporate developments or similar material events that have not yet been publicly disclosed would be materially detrimental to the Company or to the market price of the Company's stock. 1.3. "Board of Directors Suspension Event" means any Board of Directors Full Suspension Event or Board of Directors Interim Suspension Event. 1.4. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act. 1.5. "Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations of the Commission thereunder, and any successor to such statute or such rules and regulations. 1.6. "Exchange Act Information" shall mean, at any time of determination, (i) the information contained in those filings made by the Company pursuant to the Exchange Act during the most recent twelve months and (ii) information contained in any filings made by the Company pursuant to the Exchange Act that would be required to be incorporated by reference into a Registration Statement on Form S-3 filed on such date. 1.7. "Form S-1", "Form S-3", "Form S-4" and "Form S-8" mean respective forms under the Securities Act and any successor registration forms. 1.8. "Material Fact Suspension Event" means a discovery by the Company that the Shelf Registration Statement, when such document was made effective, or the Prospectus or any document incorporated by reference therein, when such document was filed, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make what was said not misleading. 1.9. "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, or other entity, and shall include any successor (by merger or otherwise) of any such entity. 1.10. "Prospectus" means the prospectus included in any Shelf Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act) as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Shelf Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. 1.11. "Register", "registered", and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act and the automatic effectiveness or the declaration or ordering of effectiveness of such registration statement or document. 1.12. "Registrable Securities" means (i) the shares of Common Stock or other securities of the Company issued or issuable upon exercise of the Warrants, (ii) any common stock or other securities issued or issuable with respect to any Registrable Securities by way of stock dividend or stock split or in connection with a combination of shares or recapitalization of the Company and (iii) any other securities for which Registrable Securities may be exchanged or converted in a merger or consolidation (or similar event) of the Company. Registrable Securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and all of such securities shall have been disposed of in accordance with such registration statement or (B) all of such securities shall have been publicly distributed pursuant to an exemption from the registration requirements of the Securities Act. 1.13. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with Sections 2 and 3 hereof, including without limitation all registration and filing fees, all listing fees, all fees and expenses of complying with securities or blue sky laws, all printing and automated document preparation expenses, all messenger and delivery expenses, and the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits required by or incident to such performance and compliance, and the reasonable fees and expenses of one legal counsel to NFLP incurred in connection with any registration hereunder, but excluding underwriting discounts and commissions and applicable transfer taxes, if any, which shall be borne by the sellers of the Registrable Securities in all cases. 1.14. "Registration Initiation Date" shall mean (x) with respect to Warrant 1, the earliest to occur of (i) delivery by NFLP (or the Designated Purchaser) of the First Option Notice (as each such term is defined in the Option Agreement between the Company and NFLP dated as of the date hereof), (ii) the satisfaction of the Roll-In Objective (as such term is defined in the Omnibus License Agreement, dated as of May 24, 2001, among the Company, NFLP, OAG and the other parties listed therein, (iii) February 15, 2007 or such earlier date as the Company reasonably determines will permit it to register the Registrable Securities as of no later than April 1, 2007 and (iv) as soon as reasonably possible following the date of any Change of Control (as defined in Warrant 1) or, if earlier, the date an agreement providing for a Change of Control is entered into; and (y) with respect to Warrant 2, satisfaction of the Roll-In Objective. 1.15. "Registration Period" for the Registrable Securities issued pursuant to either Warrant means the period beginning on the date which such Warrant becomes exercisable under the Warrant Agreement and ending on the earlier of (x) the date that all Registrable Securities relating to such Warrant have ceased to be Registrable Securities and (y) the second anniversary of the last date on which the Warrants may be exercised. 1.16. "Rule 144" means Rule 144 promulgated under the Securities Act, and any successor rule or regulation thereto, and in the case of any referenced section of such rule, any successor section thereto, collectively and as from time to time amended and in effect. 1.17. "Rule 415" means Rule 415 promulgated under the Securities Act, and any successor rule or regulation thereto, and in the case of any referenced section of such rule, any successor section thereto, collectively and as from time to time amended and in effect. 1.18. "Securities Act" means the Securities Act of 1933 or any successor federal statute, and the rules and regulations of the Commission thereunder, and in the case of any referenced section of any such statute, rule or regulation, any successor section thereto, collectively and as from time to time amended and in effect. 1.19. "Suspension Event" means any Material Fact Suspension Event, Board of Directors Full Suspension Event or Board of Directors Interim Suspension Event. 2. Required Registrations. ---------------------- 2.1. Shelf Registration. ------------------ (a) As promptly as reasonably possible following the occurrence of the Registration Initiation Date relating to a Warrant, the Company will prepare and file a registration statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (the "Shelf Registration Statement") registering the offer, issuance and sale, from time to time, of the Registrable Securities issuable upon the exercise of the Warrant for which the Registration Initiation Date has occurred and the resale, from time to time, of such Registrable Securities. The Shelf Registration Statement shall be on Form S-3 or, if not available, Form S-1 or other appropriate form permitting registration of all of the Registrable Securities for resale by NFLP in the manner or manners designated by NFLP (including, without limitation, underwritten offerings). The Company will not permit any securities other than the Registrable Securities to be included in the Shelf Registration Statement. The Company agrees to use its commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective as promptly as reasonably possible thereafter and, subject to the terms of this Agreement, to keep the Shelf Registration Statement continuously effective during the Registration Period. (b) In the event that the rights to cause the Company to register Registrable Securities pursuant to this Section 2 have been assigned by NFLP to any permitted transferee under the terms of the Warrants that is a nationally recognized financial institution (the "Financial Institution"), so long as such Shelf Registration Statement is effective, if the Financial Institution desires to exercise a Warrant or sell Common Stock by means of such Shelf Registration Statement, it shall provide two (2) business days prior written notice of any such exercise or sale (a "Selling Notice") to the General Counsel of the Company by facsimile, which Selling Notice shall specify the date on which the Financial Institution intends to exercise or begin such distribution and any information with respect to the Financial Institution and its intended distribution of Registrable Securities as may be required to amend the Shelf Registration Statement or supplement the related prospectus with respect to such intended distribution of Registrable Securities (the "Requisite Information"). Subject to Section 2.2 hereof, as soon as reasonably possible after the date of the Selling Notice and Requisite Information is provided, and in any event within two business days after such date, the Company shall, if necessary, prepare and file with the Commission a post-effective amendment to the Shelf Registration Statement or a supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of Registrable Securities being sold thereunder, such Prospectus will comply in all material respects with the rules and regulations under the Securities Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Financial Institution will sell all or any of such Registrable Securities pursuant to the Shelf Registration Statement and related prospectus only during the 45-day period commencing on the later of the date of the Selling Notice and effectiveness of such post-effective amendment (a "Selling Period"). The Financial Institution may provide additional Selling Notices hereunder during or after any Selling Period so long as the Financial Institution in good faith intends to exercise or sell under the Shelf Registration Statement during such subsequent Selling Period. (c) It shall be a condition precedent to the obligations of the Company to take any action pursuant hereto that the NFLP shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of distribution of such Registrable Securities held by it as shall be required to amend the Shelf Registration Statement or supplement the related prospectus. (d) If NFLP so elects, it may distribute all or a portion of the Registrable Securities covered by the Shelf Registration Statement by means of an underwriting; provided that the Company shall not be obligated to arrange for more than three such underwritten offerings. 2.2. Postponement/Suspension. Upon the occurrence of a Suspension Event, the Company may postpone and/or suspend, by means of a written notice to NFLP specifying the type of Suspension Event (a "Suspension Notice") (i) the effectiveness of any Shelf Registration Statement or post-effective amendment thereto, (ii) the issuance of Registrable Securities under any Shelf Registration Statement upon exercise of the Warrants, and (iii) any sales pursuant to any Shelf Registration Statement, for a period of (x) up to five (5) business days in the case of a Material Fact Suspension Event (or, if the Company has filed a post-effective amendment to correct the misstatement or omission, such longer period until the Commission has declared such post-effective amendment effective), (y) forty-five (45) days in the case of a Board of Directors Interim Suspension Event and (z) sixty (60) days in the case of a Board of Directors Full Suspension Event; provided, however, that the Company may not exercise its rights under this Section 2.2. in the case of a Board of Directors Suspension Event more frequently than one time in any consecutive 12 month period. NFLP agrees that upon delivery to NFLP of any Suspension Notice, NFLP shall discontinue any disposition of the Registrable Securities under the Shelf Registration Statement and shall promptly notify any underwriter that it should immediately discontinue such disposition until the Company has notified NFLP of the ceasing of such Suspension Event, which, (i) in the case of a Board of Directors Interim Suspension Event, shall be no later than thirty (30) days following delivery of the Suspension Notice and (ii) in the case of a Board of Directors Full Suspension Event, shall be no later than sixty (60) days following delivery of the Suspension Notice. The Company will provide written notice to NFLP of the ceasing of any Suspension Event upon such cessation. 2.3. Payment of Expenses. The Company hereby agrees to pay all Registration Expenses in connection with the Shelf Registration Statement. 3. Registration Procedures. If and whenever the Company is required to file and make effective the Shelf Registration Statement, the Company will as expeditiously as reasonably possible: 3.1. Registration Statement. Prepare and file with the Commission the Shelf Registration Statement pursuant to Section 2; provided, that before filing the Shelf Registration Statement or any amendments or supplements thereto, the Company will furnish to and afford NFLP and NFLP's counsel a reasonable opportunity to review copies of all such documents (excluding any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed. 3.2. Commission Comments. Furnish to NFLP and NFLP's counsel copies of all comment letters from the Commission to the Company relating to any Shelf Registration Statement or any amendment or supplement thereto, and respond to such comments as promptly as reasonably possible. 3.3. Amendments and Supplements to Registration Statement. Prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement continuously effective for the Registration Period; supplement or make amendments to such Shelf Registration Statement with the Exchange Act Information or such information regarding NFLP or its plan of distribution as the managing underwriter, if any, or NFLP or its counsel reasonably request to be included therein; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; promptly incorporate in a Prospectus supplement or post-effective amendment the Exchange Act Information or such information regarding NFLP or its plan of distribution as the managing underwriters, if any, or NFLP or its counsel reasonably request to be included therein; comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by such Shelf Registration Statement as so amended or in such Prospectus as so supplemented. In the case of Material Fact Suspension Event, the Company shall, as promptly as reasonably possible and in any case within five business days after the occurrence of such Material Fact Suspension Event, prepare and file an amendment or a post-effective amendment, as applicable, to the applicable Shelf Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Shelf Registration Statement and Prospectus so that such Shelf Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and shall use its reasonable efforts to cause the Commission to declare any such post-effective amendment effective as promptly as reasonably possible thereafter. 3.4. Stop Transfer Orders. Use its reasonable efforts (including the taking of legal action against the Commission) to obtain the withdrawal of any order suspending the effectiveness of a Shelf Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities to be sold by NFLP, for sale in any jurisdiction. 3.5. Disclosure. Make available for inspection by NFLP, any underwriter participating in any registration of Registrable Securities, and any attorney, accountant or other agent retained by NFLP or any such underwriter (collectively, the "Inspectors"), at the offices where normally kept, during regular business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "Records") and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Shelf Registration Statement, in each case to the extent reasonably necessary to conduct a reasonable investigation within the meaning of the Securities Act. Records which the Company determines, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by any Inspector, unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Shelf Registration Statement, (ii) a confidentiality agreement with regard to such Records in form and substance reasonably satisfactory to the Company is executed by the Inspector or (iii) the information in such Records has been made generally available to the public by the Company. 3.6. Furnishing of Copies of Registration Statements and Other Documents. Furnish to each seller of such Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits reasonably requested by NFLP), such number of copies of the Prospectus included in such registration statement (including each preliminary Prospectus and any summary Prospectus), each in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or Prospectus and such other documents as such seller may reasonably request in order to facilitate the disposition of its Registrable Securities covered by such registration statement. 3.7. State Securities Laws. Use its reasonable efforts to register or qualify such Registrable Securities under such securities or blue sky laws of such jurisdictions as the sellers shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable each seller to consummate the disposition in such jurisdictions of its Registrable Securities covered by such registration statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or subject the Company to taxation in any jurisdiction in which it is not so qualified. 3.8. Underwritten Offerings. In case of an underwritten offering, (i) provide the underwriters of the Registrable Securities to be included in the Shelf Registration Statement, and counsel for such underwriters, the reasonable opportunity to participate in the preparation of the Shelf Registration Statement, each Prospectus included therein or filed with the Commission, and each amendment and supplement thereto (excluding documents incorporated by reference therein), and (ii) enter into an underwriting agreement as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing underwriters in order to expedite or facilitate the registration of the Registrable Securities, and in such connection, (A) make such representations and warranties to the underwriters, with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, at such times and in such scope as are customarily made by issuers to underwriters in underwritten public offerings; (B) obtain from counsel to the Company reasonably satisfactory to the underwriters opinions of counsel in form and substance reasonably satisfactory to the managing underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings; and (C) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by any of them for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. The investment banker or investment bankers and manager or managers that will manage the offering will be selected by NFLP and be reasonably acceptable to the Company. 3.9. Exchange Listing. Cause all such Registrable Securities to be listed on each securities exchange on which the Company's Common Stock is then listed. 3.10. Share Certificates. Cooperate with NFLP and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or NFLP may reasonably request. 4. Indemnification and Contribution. --------------------------------- 4.1. Indemnities of the Company. In the event of any registration of any Registrable Securities under the Securities Act pursuant to Section 2 hereof, the Company will, and hereby does, indemnify and hold harmless NFLP and each seller of Registrable Securities and each other Person, if any, who controls NFLP or any seller within the meaning of Section 15 of the Securities Act, and in each case their respective partners, directors, officers, employees, representatives and agents (each such Person being referred to herein as a "Covered Person"), against any losses, claims, damages, liabilities, judgments, actions and expenses, joint or several (including without limitation and as incurred, reimbursement of all costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Covered Person) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or any preliminary Prospectus or final Prospectus included therein, or any related summary Prospectus, or any amendment or supplement thereto, or any document incorporated by reference therein, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable to any Covered Person in any such case for any such loss, claim, damage, liability, action or proceeding (i) to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary Prospectus, final Prospectus, summary Prospectus, amendment or supplement or incorporated document, in reliance upon and in conformity with information about such Covered Person as a holder of Warrants or Registrable Securities, or such Person's plan of distribution of securities, furnished in writing to the Company by or on behalf of such Covered Person expressly for inclusion therein or (ii) in the case of a sale directly by NFLP (including a sale of such Registrable Securities through any underwriter retained by NFLP engaging in a distribution solely on behalf of NFLP), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary Prospectus and corrected in a final or amended Prospectus, and NFLP failed to deliver a copy of the final or amended Prospectus at or prior to the confirmation of the sale of the Registrable Securities to the person asserting any such loss, claim, damage or liability in any case in which such delivery is required by the Securities Act. The indemnities of the Company contained in this Section 4 shall remain in full force and effect regardless of any investigation made by or on behalf of such Covered Person and shall survive any transfer of Registrable Securities. 4.2. Indemnities to the Company. In the event of any registration of Registrable Securities pursuant to Section 2, NFLP will, and hereby does, indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 4.1 hereof) the Company, each director of the Company, each officer of the Company who shall sign such registration statement and each other Person (other than such seller), if any, who controls the Company within the meaning of Section 15 of the Securities Act, with respect to any statement in or omission from such registration statement, any preliminary Prospectus or final Prospectus included therein, or any amendment or supplement thereto, or any document incorporated therein, if such statement or omission was made in reliance upon and in conformity with information about such Covered Person as a holder of Warrants or Registrable Securities, or such Person's plan of distribution, furnished in writing to the Company by or on behalf of such Covered Person expressly for inclusion therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive any transfer of Registrable Securities. 4.3. Indemnification Procedures. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim of the type referred to in the foregoing provisions of this Section 4, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give written notice to each such indemnifying party of the commencement of such action; provided, however, that the failure of any indemnified party to give notice to such indemnifying party as provided herein shall not relieve such indemnifying party of its obligations under the foregoing provisions of this Section 4, except and solely to the extent that such indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, each indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to such an indemnifying party), and after notice from an indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof; provided, however, that (i) if the indemnified party reasonably determines that there may be a conflict between the positions of such indemnifying party and the indemnified party in conducting the defense of such action or that there may be defenses available to such indemnified party different from or in addition to those available to such indemnifying party, then counsel for the indemnified party shall be entitled to conduct the defense to the extent reasonably determined by such counsel to be necessary to protect the interests of the indemnified party and such indemnifying party shall employ separate counsel for its own defense, (ii) in any event, the indemnified party shall be entitled to have counsel chosen by such indemnified party participate in, but not conduct, the defense and (iii) the indemnifying party shall bear the legal expenses incurred in connection with the conduct of, and the participation in, the defense as referred to in clauses (i) and (ii) above. If, within a reasonable time after receipt of the notice, such indemnifying party shall not have elected to assume the defense of the action, such indemnifying party shall be responsible for any legal or other expenses incurred by such indemnified party in connection with the defense of the action, suit, investigation, inquiry or proceeding. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 4.4. Contribution. If the indemnification provided for in Sections 4.1 or 4.2 hereof is unavailable to a party that would have been an indemnified party under any such Section in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each party that would have been an indemnifying party thereunder shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of such indemnifying party on the one hand and such indemnified party on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof). The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or such indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentence. The amount paid or payable by a contributing party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 4.4 shall include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 4.5. Limitation on Liability of Holders of Registrable Securities. The liability of NFLP in respect of any indemnification or contribution obligation of such holder arising under this Section 4 shall not in any event exceed an amount equal to the total proceeds to NFLP (net of Warrant exercise price and after deduction of all underwriters' discounts and commissions and all other expenses paid by NFLP in connection with the registration in question) from the disposition of the Registrable Securities disposed of by NFLP pursuant to such registration. 5. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to Section 2 and related rights of NFLP hereunder may be assigned by NFLP to any permitted transferee under the terms of the Warrants. Any transferee to whom rights under this Agreement are transferred shall (i) as a condition to such transfer, deliver to the Company a written instrument by which such transferee agrees to be bound by the obligations imposed upon NFLP under this Agreement to the same extent as if such transferee were the NFLP under this Agreement and (ii) be deemed to be NFLP for all purposes hereunder, except that any permitted transferee that is a nationally recognized financial institution shall be subject to the terms contained in Section 2.1(b). 6. Legends. NFLP agrees and understands that, except as contemplated in this Agreement, the issuance to NFLP and the sale or other disposition of Registrable Securities by NFLP will not be registered under the Securities Act or the securities laws of any state and that such shares may be sold or disposed of only in one or more transactions registered under the Securities Act and, where applicable, such state laws or as to which an exemption from the registration requirements of the Securities Act and, where applicable, such state law is available. NFLP acknowledges that, except as expressly set forth in this Agreement, NFLP has no right to require the Company to cause the registration of any Registrable Securities. NFLP understands and agrees that each certificate representing any Registrable Securities (each, a "Certificate") shall be subject to stop transfer instructions and shall bear the following legend: "THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH STATE LAWS." The Company hereby agrees that it will, upon the request of NFLP, eliminate any stop transfer instructions and any restrictive legend on any certificates representing the Registrable Securities if (i) in the opinion of counsel to NFLP or the seller, which counsel is reasonably satisfactory to the Company, NFLP is entitled to sell or dispose of the Registrable Securities represented by such Certificate without registration or (ii) such shares are being disposed of by NFLP under a Registration Statement pursuant to Section 2 herein and in compliance with the Securities Act and applicable state and securities laws. 7. Rule 144. The Company covenants that it will file the reports required to be filed by it pursuant to the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of NFLP, make available information required by Rule 144 under the Securities Act in order to permit sales pursuant to Rule 144. The Company further covenants that it will take such further action as NFLP may reasonably request, all to the extent required from time to time to enable NFLP to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. 8. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by facsimile, courier services or personal delivery to the following addresses, or to such other addresses as shall be designated from time to time by a party in accordance with this Section 8: to the Company at: Reebok International Ltd. 1895 J.W. Foster Boulevard Canton, Massachusetts 02021 Attention: General Counsel Facsimile No.: (781) 401-4780 with a copy to: Ropes & Gray One International Place Boston, Massachusetts 02110 Attention: Keith F. Higgins, Esq. Facsimile No.: (617) 951-7050 to NFLP at: National Football League Properties, Inc. 280 Park Avenue New York, New York 10017 Attention: Gary Gertzog, Esq. Facsimile No.: (212) 681-7599 with a copy to: Covington & Burling 1330 Avenue of the Americas New York, New York 10019 Attention: J. D. Weinberg, Esq. Facsimile No.: (212) 841-1010 All notices and communications under this Agreement shall be deemed to have been duly given (i) when delivered by hand, if personally delivered, (ii) when delivered to a courier, if delivered by commercial overnight courier service, (iii) when receipt is acknowledged, if sent by facsimile. 9. No Inconsistent Agreements. The Company has not as of the date hereof entered, and shall not after the date of this Agreement enter, into any agreement with respect to any of its securities that breaches or violates the rights granted to NFLP in this Agreement or otherwise conflicts with the provisions hereof. The Company has not entered, and will not enter, into any agreement with respect to any of its securities which will grant to any Person piggy-back registration rights with respect to a Registration Statement. 10. Entire Agreement. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and thereof and supersedes any and all prior understandings and agreements, whether written or oral, with respect to suchsubject matter. 11. Amendments, Waivers and Consents. Any provision in this Agreement may be made, and the observance thereof may be waived, if the Company (a) shall obtain consent thereto in writing from persons holding a majority of the Registrable Securities then outstanding and (b) shall deliver copies of such consent to any holders who did not execute the same. 12. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the personal representatives, successors and assigns of the respective parties hereto. Notwithstanding the foregoing sentence, the Company shall not have the right to assign its obligations hereunder or any interest herein without obtaining the prior written consent of the NFLP. 13. General. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 14. Remedies. In the event of a breach by the Company of any of its obligations under this Agreement, NFLP, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, the Company shall waive the defense that a remedy at law would be adequate. 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK. 16. JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY MUST BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY, OR THE COMMONWEALTH OF MASSACHUSETTS LOCATED IN BOSTON, MASSACHUSETTS, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE DISTRICT OF MASSACHUSETTS: BOSTON AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 8. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. 17. Severability. If any provision of this Agreement shall be found by any court of competent jurisdiction to be invalid or unenforceable, the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable. Such provision shall, to the maximum extent allowable by law, be modified by such court so that it becomes enforceable, and, as modified, shall be enforced as any other provision hereof, all the other provisions hereof continuing in full force and effect. 18. Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and NFLP have executed this Agreement as of the date and year first above written. REEBOK INTERNATIONAL, LTD. By: /s/ Paul B. Fireman ------------------------------------------- Name: Paul B. Fireman Title: Chairman and Chief Executive Officer NATIONAL FOOTBALL LEAGUE PROPERTIES, INC. By: /s/ Gary Gertzog ---------------------------------------------- Name: Gary Gertzog Title: Senior Vice President, Business Affairs and General Counsel -----END PRIVACY-ENHANCED MESSAGE-----