EXHIBIT 10.1
Mr. Xxxxxx Xxxxx
Reebok International Ltd.
Re: Employment Agreement
Dear Xxxxxx:
This letter will evidence the agreement between you and Reebok
International Ltd. (referred to as "Reebok", "RIL" or the "Company") relating to
your continued employment by Reebok effective as of June 12, 2002 (the
"Effective Date"). Our agreement is as follows:
1. Your Position; Duties and Responsibilities.
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Reebok hereby agrees to continue your employment beginning as of June 12, 2002,
on the terms and subject to the conditions set out in this Agreement. You are
hereby designated during the Employment Term (as defined in Section 2 below) as
Executive Vice President of RIL and President and CEO of the Reebok Brand.
In such capacity, you will have all duties, responsibilities and authorities
normally associated with such position, including responsibility for executing
the strategic direction and for operating results of the business in the Reebok
Brand on a worldwide basis. You will devote your full business time and your
best efforts in carrying out the duties, responsibilities and authorities of
that position, and you will operate within corporate policies, guidelines,
regulations, and strategies, and mutually-agreed budgets, cash flows and capital
authorization levels established by the Board of Directors of the Company or
its Chief Executive Officer. Subject to the provisions of Section 10B, your
duties and responsibilities may be changed from time to time. You will report to
the President and COO of RIL (currently Xxx Xxxxxxxx) or an individual with the
same or higher level within RIL.
You shall not be prevented from accepting positions of responsibility
in directorships of outside business corporations and charitable organizations,
subject to the limitation that such activities shall not interfere with your
discharge of your responsibilities to Reebok hereunder and shall not include any
involvement with any competing enterprise. You will comply with whatever
policies are in existence in this regard, including the current policy, which
limits senior executives to serving on no more than two (2) for-profit boards of
directors.
2. Employment Term.
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A. Employment Term.
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The term of your employment under this Agreement shall commence as
of the Effective Date and will continue until June 30, 2005 (the
period of time shall be referred to as the "Initial Employment
Term").Subject to the terms and conditions of this Agreement, if
this Agreement has not been terminated pursuant to Section 10 below
prior to the expiration of the Initial Employment Term, then this
Agreement shall automatically be extended for up to two (2)
additional one (1) year terms (the "Renewal Terms"). The Initial
Employment Term and any Renewal Terms are herein collectively
referred to as the "Employment Term."
B. Survival of Certain Provisions.
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The obligations set forth in the Employee Agreement, Non-Competition
Agreement, and the Code of Conduct referred to in Section 9 will
continue in effect, to the extent applicable after termination,
after the termination of your employment with the Company and/or
after the expiration of the Employment Term.
3. Base Salary.
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Your initial base salary will be at an annualized rate of $500,000.00
($19,230.77 gross on a bi-weekly basis) payable in accordance with
Reebok's normal pay practices. Your base salary will next be reviewed (but not
necessarily increased) in March of 2003, and annually thereafter in accordance
with Board practices and consistent with the treatment of other senior
executives.
4. Annual Incentive Compensation.
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(i) Executive Performance Incentive Plan.
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For each calendar year of the Employment Term, you will participate
in the same incentive compensation plan as the other senior
executives of the Company, and to the extent that you share
financial performance criteria with those other executives under
the plan, your required level of financial performance will be set
at the same level as for those other executives. Your annual
incentive compensation has been targeted at 100% of your base
salary for the last six months of fiscal year 2002 and 60% for
your first six months of 2002. Actual payment levels under the
incentive compensation program will be based on your achievement
of financial and management performance goals, with such goals to be
established each year by the Company's Chief Executive Officer
or Board of Directors, and payments will be made in accordance with
the terms and subject to the conditions of the incentive plan then
in effect for the senior executives of the Company. You will be
eligible for consideration to receive a bonus award with respect
to any plan year for which you are actively employed as of
December 31 of such plan year.
(ii) Disputes.
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In the event of any disagreement concerning whether
incentive plan goals have been achieved and/or the percentage
bonus to be awarded pursuant to the incentive plan, the
decision of the Company's Chief Executive Officer shall be
final. If you believe that the decision of the Company's Chief
Executive Officer has not been made in good faith, you may
submit your position on the matter in writing to the
Compensation Committee of the Company's Board of Directors,
which will consider your position at its next regular meeting.
The Compensation Committee has full discretion to determine
the issue and its determination will fully bind the parties.
5. Relocation Assistance.
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Please see the Relocation Policy Agreement attached as Exhibit E, which is
made a part of this Agreement.
6. Stock Options.
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(i) General.
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The Company may grant you so-called "non-qualified"
stock options with respect to its common stock under the
Company's 1994 Equity Incentive Plan, the 2001 Equity
Incentive and Director Deferred Compensation Plan, and any
subsequent additional or successor plan in effect at a
relevant time (such plans are referred to herein as the
"Option Plan"). The terms of the Option Plan and any agreement
under the Option Plan relating to the options will govern the
exercise and all other matters relating to the options. The
amount of any options will be in accordance with Board
practices and with the approval of the Compensation Committee.
(ii) Stock Option Grant.
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50,000 "non-qualified" stock options will
be granted to you under the Option Plan to acquire additional
shares of Reebok common stock, at $26.77 per share (the market
price of Reebok's common stock upon the closing of the market
as of the June 12, 2002 date of grant). This stock option
grant will expire ten (10) years after the date of grant and
will become ratably exercisable over a four (4) year period on
the anniversary of the date of grant.
7. Fringe Benefits and Business Related Expenses.
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(i) General.
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You will be eligible to participate in or receive benefits
under any pension plan, 401(k) retirement plan, medical and
dental benefits plan, lifeV insurance plan, short-term and
long-term disability plans, supplemental and/or incentive
compensation plans, or any other employee benefit or fringe
benefit plan, generally made available by the Company to senior
executives in accordance with the specific eligibility and
approval requirements of such plans and subject to the terms and
conditions set forth in this Agreement. Such fringe benefits for
senior executives will include reimbursement of financial
planning and legal services up to thepolicy limit for other senior
executives in the program. Notwithstanding the foregoing, you
will not be eligible to participate in the Reebok
International Ltd. Severance Policy during or at the end of the
EmploymentTerm.
(ii) Personal Allowance.
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In addition, the Company will provide to
you during the Employment Term a personal allowance of $2,500
per month to be used in your discretion. This personal
allowance may be increased, decreased or eliminated, but in no
event will you be treated less favorably than other similarly
situated executive officers.
(iii) Expenses.
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The Company will promptly reimburse you for the
reasonable and necessary business expenses incurred by you in
the performance of the duties under this Agreement in
accordance with its customary practices applicable to senior
executives, provided that such expenses are incurred and
accounted for in accordance with the Company's policy.
8. Vacation.
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You will be entitled to vacation in accordance with normal Reebok policy for
senior executives, with any additional amount to be determined by the Company's
Chief Executive Officer.
9. Confidentiality, Non-Competition and Code of Conduct.
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(i) General.
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During the Employment Term and thereafter you will be
subject to the terms and conditions of each of the following
standard employee agreements as modified pursuant to Section
9(ii) below: the standard Reebok Employee Agreement attached
hereto as Exhibit B (the "Employee Agreement"); the standard
Reebok Non-Competition Agreement attached hereto as Exhibit C
(the "Non-Competition Agreement"); and the Reebok Code of
Conduct attached hereto as Exhibit D (the "Code of Conduct").
The Employee Agreement, Non-Competition Agreement, and the
Code of Conduct, as modified by this Agreement, will continue
in effect, to the extent applicable, after the termination of
your employment with the Company.
(ii) Ancillary Agreement Modifications.
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(a) Employee Agreement [Exhibit B].
The Employee Agreement attached hereto as Exhibit B is modified
as follows:
(I) Section 5 of the Employee Agreement is
modified by adding a new second sentence to
read as follows: "Notwithstanding the
preceding sentence, in no event will I hold
any equity or other interest of any kind
in Nike, adidas, Timberland, K Swiss, Puma,
Stride Rite, New Balance and Fila
or their affiliates after December 31, 2002."
(II) Section 7 of the Employee Agreement is deleted and Section
2 of this Agreement is substituted therefor.
(b) Non-Competition Agreement.
The Non-Competition Agreement attached hereto as Exhibit C is
modified by adding the following new sentence at the end of
Section I.A. to read as follows: "Notwithstanding the
preceding sentence, you may invest in 1% or less of
the equity securities of any publicly traded company;
provided, however, that in no event will you hold any
equity or other interest of any kind in Nike, adidas,
Timberland, K Swiss, Puma, Stride Rite, New Balance
and Fila or their affiliates after December 31, 2002."
(c) Code of Conduct.
The Code of Conduct attached hereto as Exhibit D is modified
as follows:
(I) The second paragraph of the section entitled
"Investments in or Affiliations with
Suppliers, Customers or Competitors" under
"Conflicts of Interest" is modified to read
as follows: "Generally, ownership interests
of less than 1% of the equity or other
securities of a publicly traded corporation
will not be considered to create a conflict.
However, by December 31, 2002 you must not
hold any ownership or other interest in the
following competitors of Reebok or their
affiliates: Nike, adidas, Timberland, K
Swiss, Puma, Stride Rite, New Balance and
Fila. From time to time, the Company may
distribute an updated list of some of our
competitors for whom any stock ownership
would be prohibited."
(II) The last paragraph of the Code of Conduct is
modified by adding the following new
sentence at the end thereof to read as
follows: "Notwithstanding the foregoing,
your employment shall be subject to the
terms and conditions of any written
employment agreement in effect between you
and the Company."
10. Employment Termination.
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Notwithstanding the provisions of Section 2 above, your employment under this
Agreement may be terminated prior to the end of the Employment Term in any of
the following cases:
A. Voluntary Termination Without Good Reason.
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You may terminate your employment under this Agreement, without
"good reason," upon ninety (90) days prior written notice to the
Company. Such written notice will set forth the date your employment
ends.
B. Voluntary Termination With Good Reason.
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You may terminate your employment under this Agreement with "good
reason" upon at least fourteen (14) days prior written notice to the
Company; provided, however, that you must first provide written
notice of the "good reason" to the Company, and the Company must
fail to cure such "good reason" within thirty (30) days after the
date on which you give written notice of such "good reason." For
purposes of this Agreement, "good reason" will mean the occurrence
of any of the following:
(i) A material diminution in the overall level of your
responsibilities, duties, powers or authority, except in
connection with the cessation of your employment by a) death,
b) by the Company for cause or your incapacity, as defined in
Section 10E, or c) by you other than for "good reason" as
defined in this Section 10B.
(ii) Any reduction in Base Salary or short or long-term incentive
compensation, except for across-the-board salary or incentive
compensation reductions similarly affecting all senior
executives of the Company;
(iii) The failure by the Company to pay you when due any material
amount of your current compensation or any material amount of
your compensation payable under any plan, agreement or
arrangement of or with the Company, within ten (10) days after
you make written demand for such amount.
(iv) The failure of the Company to maintain your relative level of
coverage under the Company's employee benefit plans, policies,
practices, or arrangements in which you participate, both in
terms of the amount and timing of benefits provided and the
relative level of your participation. For this purpose, the
Company may eliminate and/or modify existing employee benefit,
incentive compensation, retirement, or material fringe benefit
plans, policies, practices, or arrangements and coverage levels
on a consistent and non-discriminatory basis applicable to all
such executives; provided, however, that your level of coverage
under all such programs must be at least as great as is such
coverage provided to employees who have the same or lesser
levels of reporting responsibilities within the Company's
organization.
(v) The changing of your reporting relationship to a position
lower than President and COO of RIL so long as you deliver
your resignation within six (6) months of the change and
provide at least three (3) months advance notice and
transition time.
Your continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
C. Cause.
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The Company may terminate your employment under this Agreement for
cause, upon written notice to you. For purposes of this Agreement,
"cause" will mean:
(i) fraud, embezzlement, or other intentional misappropriation from
the Company or an affiliate thereof;
(ii) your conviction of a felony or a misdemeanor involving moral
turpitude;
(iii) any other conduct on your part involving fraud, gross
negligence or willful misconduct, or other action which
materially damages the reputation of the Company or an
affiliate thereof; or
(iv) your default of any material obligations under this Agreement,
provided, however, that the Company must first provide written
notice of the default to you, and you must fail to cure such
default within thirty (30) days after the date on which the
Company gives you written notice of such default.
It is understood and agreed that a failure to achieve financial or
other business results is not a basis for a "for cause" termination. No
termination of your employment for cause shall be deemed to have
occurred unless you have been given notice of the reason therefore
including the allegations which may constitute reason for such
termination and after (a) you have been provided an opportunity to be
heard by the Board of Directors of the Company or the Executive
Committee thereof, and (b) such decision has been upheld by the Board
or Executive Committee.
D. Death.
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Your employment will terminate immediately upon your death, subject
to the payment obligations set forth in Section 11B below.
E. Incapacity.
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Upon written notice to you, the Company may terminate your
employment under this Agreement in the event of your incapacity,
subject, however, to any legal obligations that mandate continued
employment. For purposes of this Agreement, "incapacity" will mean
such incapacity or disability as would qualify you for long-term
disability coverage under the Company's long-term disability
insurance plan.
F. Any Other Reasons.
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Subject to the payment obligations set forth in Section 11C, the
Company may terminate your employment for any other reason, upon
written notice to you stating the date of termination.
11. Payment Obligation in the Event of Termination.
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In the event of any termination pursuant to Section 10, Reebok shall have the
following payment obligations:
A. Voluntary Termination Without Good Reason and Termination for Cause.
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In the event your employment is terminated pursuant to Section 10A
[voluntary termination without good reason] or Section 10C
[termination for cause],
(i) Your right to receive compensation under this Agreement shall
cease as of the effective date of such termination.
(ii) The Company shall pay the following amounts to you: any
accrued but unpaid base salary for services rendered to the
date of termination; any accrued but unpaid expenses required
to be reimbursed and any vacation accrued to the date of
termination.
(iii) Except as may be provided under the terms of any incentive
compensation, employee benefit, or fringe benefit plan
applicable to the you at the time of your termination or
resignation of employment prior to the end of the Employment
Term, you shall have no right to receive any other
compensation, or to participate in any other plan, arrangement
or benefit, with respect to future periods after such
termination or resignation.
B. Termination for Death or Incapacity.
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In the event of your employment is terminated pursuant to Section
10D [death] or Section 10E [incapacity], you will be entitled to
payment of your base salary only until the last day of your
employment and no further payments of any kind will be due you from
the Company. However, upon termination of your employment because
of death or upon termination of your employment because of
disability, as defined in the Option Plan, all outstanding stock
options will become immediately exercisable pursuant to the
provisions of the Option Plan. Additionally, you or your
beneficiaries will be entitled to receive any benefits that are
payable with respect to your termination of employment under
the terms of any pension or profit-sharing plan, or life insurance
or disability plan of the Company in which you participated before
your employment ended. You will, however, not be entitled to
receive any benefit under any severance plan, arrangement or
agreement of the Company other than the payments from the Company
described in this Section 11B.
C. Voluntary Termination With Good Reason or Involuntary Termination
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for Any Other Reason.
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In the event that you terminate your employment under
this Agreement pursuant to Section 10B [voluntary termination with
"good reason"], or the Company terminates your employment for any
reason pursuant to Section 10F, including without cause (as cause is
defined in Section 10C), you will be entitled to the following:
(i) a severance period whereby you could collect your base salary
at the times and in the amounts that would have been paid for
a maximum period of eighteen (18) months (the "Severance
Period");
(ii) continuation on any Company-provided medical coverage in effect
for you and your family as of the date of termination
through the Severance Period;
(iii) continuation of life, supplemental life and AD&D insurance
coverage to the same extent through the first twelve (12) months
of the Severance Period;
(iv) entitlement for the severance pay and benefits offered
pursuant to this Section 11C will not extend beyond the date
that you obtain new employment, and continuation of medical
and dental coverage will end on the last day of the month in
which such new employment is obtained.
(v) as an incentive to find a new job, however, if you obtain new
employment prior to the expiration of the Severance Period you
will receive a lump-sum payment equal to one-half of the
remaining weeks in the Severance Period. "New employment"
shall mean a full-time job; or a part-time job or consulting
relationship in which you earn a substantial portion of your
previous compensation at RIL, as determined by the Company in
its sole discretion. However, "new employment" shall not
include employment in teaching, government, public service or
service as a corporate director, or work for fewer than
twenty-five (25) hours per work either as a consultant or as
an employee of a not-for-profit company.
(vi) you agree to provide information and services (including
without limitation, cooperation in litigation and transition
assistance) to the Company, if so requested, during the
Severance Period for no additional compensation. These
services, however, shall not exceed sixteen (16) hours per
week during the Severance Period; provided, however, that the
Company will reimburse you for any reasonable expenses
incurred on its behalf. If you are re-hired by RIL or any RIL
subsidiary or affiliated organization, the Severance Period
will cease on the date of re-employment and you shall not be
entitled to any lump sum or other payment.
(vii) the payments and benefits set forth in this Section will be
contingent upon your execution of a general release contained
in a Separation Agreement in a form acceptable to you and the
Company, and will be in lieu of payments and other benefits,
if any, to which you may be entitled under any other severance
agreement or severance plan or arrangement of the Company.
12. [intentionally left blank]
13. Miscellaneous
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(i) Successors, Assigns, Amendment, etc.
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This Agreement shall be binding upon and shall inure
to the benefit of Reebok and its successors and assigns.
Unless such assumption would otherwise occur by
operation of law, the Company shall not enter into
any agreement for the merger, consolidation, restructuring,
sale of assets or other reorganization of the Company, without
providing for the express assumption of this Agreement by the
Company's successor. This Agreement shall be binding upon you
and shall inure to the benefit of your heirs, executors,
administrators and legal representatives, but shall not be
assignable by you. This Agreement may be amended or altered
only by the written agreement of Reebok and you.
(ii) Notice.
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All notices, requests, consents and other communications
required or permitted hereunder shall be in
writing and shall be hand delivered or mailed by certified
mail, postage prepaid, addressed as follows: If to Reebok, to
General Counsel, Reebok International Ltd., 1895 X. X. Xxxxxx
Xxxxxxxxx, Xxxxxx, XX 00000, or to such other address as may
have been furnished to you in writing as herein provided; or,
if to you, to the address set forth above, or to such other
address as may have been furnished to Reebok by you as herein
provided in writing. Any notice or other communication so
addressed and so mailed shall be deemed to have been given
three days after said mailing.
(iii) Applicable Law.
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This Agreement has been executed and delivered
by both parties in the Commonwealth of Massachusetts and shall
be governed by the internal law of the Commonwealth of
Massachusetts without reference to its choice of law rules or
to any rule of any jurisdiction which would cause the rule of
another jurisdiction to apply. The venue of any action
relating to this Agreement will be the state and federal
courts located in the Commonwealth of Massachusetts.
Respecting any such action, the parties waive any right they
may have (i) to contest venue on the ground of inconvenient
forum, and (ii) to have such action heard before a jury or an
advisory jury.
(iv) Severability.
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Each provision of this Agreement is severable
from the others, and if any provision hereof shall be to any
extent unenforceable, it and the other provisions hereof shall
continue to be enforceable to the full extent allowable by any
court of competent jurisdiction, as if such offending
provision had not been a part of this Agreement.
(v) Withholding.
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The Company will cause any federal, state or local income, withholding,
employment or other tax to be withheld from payments hereunder.
(vi) Headings; Construction.
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Section headings are for convenience of reference only and do not form
part of the text of this Agreement. Whenever the context requires, the
singular will include the plural and vice versa.
(vii) Waiver.
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The failure of a party to insist on strict adherence to any term
of this Agreement on any occasion will not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(viii) Entire Agreement.
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This Agreement constitutes the entire agreement between the parties
concerning its subject matter, and supersedes any and all prior
agreements, understandings, warranties or representations between the
parties except for the agreements specifically referred to as exhibits
to this Agreement.
(ix) Indemnification.
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The Company will indemnify and hold you harmless to the extent
permitted by the Company's certificate of incorporation,
by-laws or resolutions of the Company's Board of Directors
against all liability, expense or loss (including reasonable
attorneys's fees and penalties) incurred
by you by reason of the fact that you are or were a director
or officer of the Company acting within the scope of your
duties and authorities.
(x) Counterparts.
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This Agreement my be executed in any number of counterparts, each of
which will be considered an original and such counterparts will
together be one agreement.
If you accept and agree to the foregoing, please signify by signing the enclosed
counterpart of this letter in the space provided for that purpose at the foot
thereof and delivering the signed counterpart to me, whereupon this letter will
become a binding agreement between you and the Company as of the Effective Date.
Very truly yours,
REEBOK INTERNATIONAL LTD.
/s/ Xxxxx X. Xxxxx, III
By:__________________________
Xxxxx X. Xxxxx, III
Senior Vice President and
Chief Human Resources Officer
Accepted and agreed to this 17th day of July, 2002:
/s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
