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SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material Pursuant to §240.14a-12

THE TIMBERLAND COMPANY

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 
 
 
 
 

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 
 
(1)
 
Title of each class of securities to which transaction applies:
        

 
 
(2)
 
Aggregate number of securities to which transaction applies:
        

 
 
(3)
 
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        

 
 
(4)
 
Proposed maximum aggregate value of transaction:
        

 
 
(5)
 
Total fee paid:
        

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        

 
 
(2)
 
Form, Schedule or Registration Statement No.:
        

 
 
(3)
 
Filing Party:
        

 
 
(4)
 
Date Filed:
        

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

April 15,
2005

TO
THE STOCKHOLDERS:

        The
Board of Directors and Officers of The Timberland Company invite you to attend the 2005 Annual Meeting of Stockholders to be held on Thursday, May 19, 2005, at
9:00 a.m., at The Colonnade Hotel located at 120 Huntington Avenue, Boston, Massachusetts.

        A
copy of the Proxy Statement and the proxy are enclosed.

        If
you cannot be present at the meeting, please mark, date and sign the enclosed proxy and return it as soon as possible in the enclosed envelope.

 
 
        Cordially,

 

 



 

 

        SIDNEY W. SWARTZ

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS

Date:
 
Thursday, May 19, 2005

Time:

 

9:00 a.m.

Location:

 

The Colonnade Hotel
120 Huntington Avenue
Boston, Massachusetts

Purposes for Meeting:

    1.
    To
    fix the number of directors at eleven for the coming year, subject to further action by the Board of Directors as provided in the Company’s By-Laws, and to elect eleven
    directors to hold office until their successors are duly elected and qualified; and

    2.
    To
    transact such other business as may properly come before the Annual Meeting and any adjournments thereof.

        Holders
of Class A Common Stock will vote separately as a class to elect three directors. Holders of Class A Common Stock and holders of Class B Common Stock will
vote together as a single class to elect the remaining eight directors.

        You
will receive notice of and may vote and act at the Annual Meeting only if you were a stockholder of record at the close of business on Thursday, March 24, 2005.

 
 
By Order of the Board of Directors

 

 



 

 

DANETTE WINEBERG

April 15,
2005

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

PROXY STATEMENT
April 15, 2005

TABLE OF CONTENTS

INFORMATION CONCERNING SOLICITATION AND VOTING
 
1

 

General

 

1

 
Voting Rights and Outstanding Shares
 
1

 
Quorum
 
2

 
Required Votes and Method of Tabulation
 
2

ITEM 1. ELECTION OF DIRECTORS

 

2

 

Information with Respect to Nominees

 

3

 
Corporate Governance Principles and Code of Ethics
 
4

 
Shareholder Communications to the Board of Directors
 
4

 
Committees of the Board of Directors and Board of Directors Independence
 
5

 
The Governance and Nominating Committee
 
5

 
The Management Development and Compensation Committee
 
6

 
The Audit Committee
 
7

 
Directors’ Compensation
 
9

EXECUTIVE COMPENSATION

 

10

 

Summary Compensation Table

 

10

 
Option Grants in Last Fiscal Year
 
11

 
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
 
12

 
Long-Term Incentive Plans—2004 Award
 
12

 
Equity Compensation Plan Information
 
14

 
Change of Control Arrangements
 
14

 
Performance Graph
 
15

 
Management Development and Compensation Committee Report on Executive Compensation
 
16

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

19

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

20

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

21

FINANCIAL AND OTHER INFORMATION

 

21

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

21

OTHER BUSINESS

 

21

STOCKHOLDER PROPOSALS

 

21

i




INFORMATION CONCERNING SOLICITATION AND VOTING

General

        The Board of Directors of The Timberland Company, a Delaware corporation (“Timberland” or the “Company”), is sending you the enclosed proxy in connection with its
2005 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjourned sessions of the Annual Meeting. The Annual Meeting will be held on Thursday, May 19, 2005, at 9:00 a.m., at
The Colonnade Hotel, 120 Huntington Avenue, Boston, Massachusetts. The purposes of the Annual Meeting are:

    1.
    to
    fix the number of directors at eleven for the coming year and to elect eleven directors to hold office until their successors are duly elected and qualified; and

    2.
    to
    transact such other business as may properly come before the Annual Meeting and any adjournments of the Annual Meeting.

Voting Rights and Outstanding Shares

        You may vote at the Annual Meeting only if you are a stockholder of record as of the close of business on Thursday, March 24, 2005. As of March 1,
2005, the following number of shares of the Company’s Common Stock were outstanding:

Class of Common Stock

 
Number of Shares
Outstanding

Class A Common Stock, $.01 par value (“Class A Common Stock”)
 
27,903,558

Class B Common Stock, $.01 par value (“Class B Common Stock”)
 
5,871,830

        The
Company bears all costs of solicitation of proxies. The Company may solicit proxies personally or by telephone, mail or telegram. None of the Company’s directors, officers or
employees will be specially compensated for soliciting proxies. The Company expects to mail this Proxy Statement and the enclosed proxy to stockholders on or about April 15, 2005. Unless the
Company has received instructions to the contrary, only one Annual Report or Proxy Statement, as applicable, is being delivered to multiple shareholders sharing an address. Upon written or oral
request to the Secretary of the Company, by mail at 200 Domain Drive, Stratham, New Hampshire 03885 or by telephone at (603) 772-9500, the Company will promptly deliver a copy of
the Annual Report or Proxy Statement to a shareholder if that shareholder shares an address with another shareholder to which a single copy of the applicable document was delivered. To receive a
separate Annual Report or Proxy Statement, as applicable, in the future, contact the Secretary of the Company as described above. To request delivery of a single copy of an Annual Report or Proxy
Statement for a household currently receiving multiple copies of Annual Reports or Proxy Statements, contact the Secretary of the Company as described above.

        To
vote your shares at the Annual Meeting, you must properly sign, date and return the enclosed proxy. You may specify in the proxy how you want to vote your shares. If you sign and
return your proxy but do not specify how to vote your shares, then your shares will be voted to fix the number of directors at eleven and to elect all eleven nominees.

        You
may revoke your proxy at any time before the Annual Meeting by either:

    attending
    the Annual Meeting and voting in person;

    filing
    with the Secretary of the Company an instrument in writing revoking your proxy; or

    delivering
    to the Secretary a newly executed proxy bearing a later date.

        If
a nominee for director is unable to serve as a director, the persons appointed as proxy for the Annual Meeting may, in his, her or their discretion, vote for another person as
director or vote to

1


reduce
the number of directors to less than eleven, as the Board of Directors may recommend. The Company believes that all of the nominees will be available for election.

        The
Board of Directors knows of no other matters to be presented at the Annual Meeting. If any additional matters should properly come before the Annual Meeting, the persons appointed as
proxy to vote on such matters intend to vote in accordance with his, her or their judgment.

Quorum

        A quorum of the Company’s stockholders must be present, whether by proxy or in person, for the Annual Meeting to occur. Consistent with Delaware law and under the
Company’s By-Laws, a majority of the voting power of shares entitled to be cast on a particular matter constitutes a quorum.

        To
determine the presence of a quorum, the following will count as shares present:

    shares
    represented by proxies that withhold authority to vote for a nominee for director;

    shares
    represented by proxies that indicate an abstention to vote for a nominee for director; or

    a
    “broker non-vote” (shares held by your brokers or nominees as to which (i) you have not provided voting instructions and (ii) the broker or
    nominee does not have discretionary voting power).

Required Votes and Method of Tabulation

        You are entitled to one vote for each share of Class A Common Stock you hold and entitled to ten votes for each share of Class B Common Stock you
hold. Holders of Class A Common Stock will vote separately as a class to elect nominees Ian W. Diery, Irene M. Esteves and John A. Fitzsimmons. Holders of Class A Common Stock and
holders of Class B Common Stock will vote together as a single class to elect nominees Sidney W. Swartz, Jeffrey B. Swartz, Virginia H. Kent, Kenneth T. Lombard, Edward W. Moneypenny, Peter R.
Moore, Bill Shore and Terdema L. Ussery, II.

        The
Company will appoint election inspectors who will count the votes cast by proxy or in person at the Annual Meeting. The eleven nominees for election as directors who receive the
greatest number of votes properly cast will be elected.




ITEM 1. ELECTION OF DIRECTORS

        The directors elected at each Annual Meeting serve for the following year and until their respective successors are duly elected and qualified. The Company’s
By-Laws specify that the Board of Directors or the stockholders may determine the number of directors of the Company. The stockholders or the Board of Directors may increase the number of
directors fixed at the Annual Meeting and may fill any vacancy arising on the Board of Directors.

        The
current Board of Directors consists of nine members. All current directors are nominees for director at the Annual Meeting, except for John E. Beard and John F. Brennan who have each
attained the Board of Directors’ mandatory retirement age of 72. The incumbent directors were elected at the 2004 Annual Meeting of Stockholders.

2


Information with Respect to Nominees

        The names, ages, principal occupations during the past five years and certain other information with respect to the nominees for election are as follows:

Name and Year
First Elected Director

 
Age
 
Principal Occupation During the Past Five Years
and Directorships of Other Public Companies


Sidney W. Swartz (1978)

 

69

 

Sidney Swartz has been the Company’s Chairman of the Board since June 1986. Sidney Swartz also was the Company’s Chief Executive Officer and President from June 1986 until June 1998.

Jeffrey B. Swartz (1990)

 

45

 

Jeffrey Swartz has been the Company’s President and Chief Executive Officer since June 1998. Jeffrey Swartz is the son of Sidney Swartz.

Ian W. Diery (1996)

 

55

 

Mr. Diery has been the President and Chief Executive Officer of Electronic Scrip, Inc. since November 1997.

Irene M. Esteves (2003)

 

46

 

Ms. Esteves was Senior Managing Director, Chief Financial Officer and Chief of Human Resources at Putnam Investments from July 2003 through April 2004. Prior to that, she served as Putnam’s Chief Financial Officer from 1997. Ms.
Esteves serves as a director of Johnson Diversey, Inc.

John A. Fitzsimmons (1996)

 

62

 

Mr. Fitzsimmons was the Senior Vice President—Consumer Electronics of Circuit City Stores, Inc. from January 1987 until his retirement in June 2000.

Virginia H. Kent (1999)

 

50

 

Ms. Kent is an independent consultant and was the President and Chief Executive Officer of reflect.com from December 1999 until June 2002. Prior to this, Ms. Kent served at Hasbro Corporation in a variety of positions, most recently as
President—U.S. Toy Group.

Kenneth T. Lombard

 

50

 

Mr. Lombard has been the President of Starbucks Entertainment, a business unit of Starbucks Coffee Company, since 2004. From 1992 to 2004, Mr. Lombard was the co-founder and President of Johnson Development Company.

 
 
 
 
 

3



Edward W. Moneypenny

 

63

 

Mr. Moneypenny has been the Senior Vice President—Finance and Chief Financial Officer of 7-Eleven, Inc. since 2002. In 2001, Mr. Moneypenny served as the Executive Vice President—Finance and Chief Financial Officer of Covanta Energy
Corporation and served from 1999 to 2000 as the Senior Vice President—Finance and Chief Financial Officer of Florida Progress Corporation.

Peter R. Moore

 

50

 

Since 2003, Mr. Moore has been employed by the Home and Entertainment Division of Microsoft Corporation, first as Corporate Vice President of Worldwide Retail Sales and Marketing and currently as Corporate Vice President. From 1999 to 2003, Mr. Moore
served first as Senior Vice President of Marketing and then as President and Chief Operating Officer of Sega of America Dreamcast, Inc.

Bill Shore (2001)

 

50

 

Mr. Shore founded Share Our Strength in 1984 and is currently its President. Mr. Shore is also Chairman of Community Wealth Ventures, Inc., a for-profit subsidiary of Share Our Strength.

Terdema L. Ussery, II

 

46

 

Mr. Ussery has been the President and Chief Executive Officer of the Dallas Mavericks since 1997. Mr. Ussery has also been the Chief Executive Officer of HDNet since 2001.

Corporate Governance Principles and Code of Ethics

        The Board of Directors has established corporate governance principles for the Board and committees of the Board to follow regarding effective corporate
governance and compliance with laws and regulations. The corporate governance principles require the Board to appoint a Lead Director if the Chairman of the Board of Directors is not independent.
Since Sidney W. Swartz is not independent, the Board of Directors appointed Irene M. Esteves as the Lead Director in 2004. The Lead Director, among other duties, assists the Board and Company
management in setting the agenda for each meeting of the Board of Directors.

        The
Company has also adopted a Code of Ethics that applies to all directors, executives, and employees of the Company to deter wrongdoing and promote ethical conduct, compliance with law
and internal reporting of wrongdoing. These documents and the charter for each of the committees of the Board of Directors are available on the Company’s website, www.timberland.com, and may also be
obtained by writing to the Company’s Secretary, 200 Domain Drive, Stratham, New Hampshire 03885.

Shareholder Communications to the Board of Directors

        Shareholders may send communications to the non-management members of the Board of Directors. Shareholders may send their written communications to
the Secretary of the Company at 200 Domain Drive, Stratham, New Hampshire 03885 and all communications will be given directly to

4


the
non-management directors unless they would be more appropriately addressed by other departments within the Company, such as customer or vendor services.

Committees of the Board of Directors and Board of Directors Independence

        The Board of Directors has a Governance and Nominating Committee, a Management Development and Compensation Committee, and an Audit Committee. While the Company
believes that the majority of the members of its Board of Directors are independent, the Company is exempt from the listing standards of the New York Stock Exchange requiring that a majority of the
Board of Directors be independent and that all of the members of the compensation and nominating committees be independent. The Company is relying on the “controlled company” exemption provided by the
New York Stock Exchange based on the fact that more than 50% of the voting power of the Company’s voting stock is held by Sidney W. Swartz and The Sidney W. Swartz 1982 Family Trust (the Company is
therefore a “controlled company” as defined in the New York Stock Exchange’s listing standards). During 2004, the Board of Directors and its committees held the following number of meetings:

 
 
2004 Meetings

Board of Directors
 
7

Governance and Nominating Committee
 
5

Management Development and Compensation Committee
 
6

Audit Committee
 
8

        All
directors attended more than 75% of the total number of meetings held in 2004 of the Board of Directors and the committees of the Board on which he or she served. Although the
Company expects all nominees for the Board of Directors to attend the Annual Meeting of Stockholders, Peter R. Moore will not be able to attend due to a scheduling conflict. All members of the Board
of Directors who were members on May 20, 2004, the date of the last Annual Meeting of Stockholders, attended the meeting.

The Governance and Nominating Committee

        The members of the Governance and Nominating Committee are Mr. Beard, Chairman, Ms. Kent and Mr. Shore. The Governance and Nominating
Committee’s responsibilities include, but are not limited to:

    reviewing
    the organization, role and structure of the Board of Directors including the nature and extent of delegation of responsibilities to committees of the Board and
    reviewing directors’ compensation;

    developing,
    reviewing, evaluating and recommending to the Board for adoption corporate governance principles applicable to the Company;

    making
    recommendations to the full Board with respect to membership on committees and chairmanship of committees;

    recommending
    to the Board guidelines and criteria for Board membership and identifying and reviewing candidates for election to the Board and making recommendations relative
    to their election as directors;

    periodically
    evaluating the composition of the Board and the effectiveness of the Board and its committees’ service to the Company, including its own performance annually;
    and

    communicating
    with management to ensure that materials and information provided to the Board are appropriate to enable the Board to fulfill its responsibilities.

5

        The
Governance and Nominating Committee has established a process for identifying and evaluating nominees for director. Although the Governance and Nominating Committee will consider
nominees recommended by shareholders, the Committee believes that the process it utilizes to identify and evaluate nominees for director is designed to produce nominees that possess the educational,
professional business and personal attributes that are best suited to further the Company’s mission. The Committee may identify nominees through the use of professional search firms that may utilize
proprietary screening techniques to match candidates to the Committee’s specified qualifications. The Committee may also receive recommendations from existing directors, executive officers, key
business partners, and trade or industry affiliations. The Committee will consider, among other factors, the following to evaluate Committee or shareholder recommended nominees: candidates’
experience, skills, and other qualifications in view of the specific needs of the Board of Directors and the Company; diversity of backgrounds, skills, and expertise; and high ethical standards,
integrity and proven business judgment. The professional search firm engaged by the Company identified Messrs. Lombard, Moneypenny, Moore and Ussery as prospective nominees to the Board of
Directors. The Company’s Chief Executive Officer discussed these nominees with the Governance and Nominating Committee. The Committee further evaluated each of these individuals based on the criteria
described above and then approved each as a nominee to the Board of Directors.

        The
Governance and Nominating Committee will consider nominations to the Board of Directors from shareholders using the same criteria described above. To be considered by the Governance
and Nominating Committee for nomination and inclusion in the Company’s proxy statement for its 2006 Annual Meeting of Stockholders, shareholder recommendations must be received by the Company’s
Secretary no later than December 16, 2005. Shareholders should write to the Company’s Secretary at 200 Domain Drive, Stratham, New Hampshire 03885 and such recommendations must include:
(i) the name and address of the candidate, (ii) a brief biographical description as well as qualifications, taking into consideration the criteria described above, and (iii) a
signed consent from the candidate indicating his or her consent to be named in the proxy statement and serve if elected.

The Management Development and Compensation Committee

        The members of the Management Development and Compensation Committee are Ms. Kent, Chair, Ms. Esteves and Mr. Fitzsimmons. The Management
Development and Compensation Committee’s responsibilities include, but are not limited to:

    determining
    and presenting to the Board of Directors, other than management directors, for its ratification the compensation of the Chairman, and of the President and Chief
    Executive Officer;

    determining
    the compensation of the executive officers who report directly to the Chief Executive Officer;

    reviewing,
    adopting and revising succession plans for the positions of Chairman, President, Chief Executive Officer and Chief Operating Officer;

    reviewing
    the general principles on which the Company bases its compensation, benefits and management development and succession policies and practices for all employees of
    the Company;

    supervising
    the administration of the Company’s 1997 Incentive Plan, as amended, and other non-stock based benefit plans;

6

    consulting
    with the Governance and Nominating Committee regarding compensation for members of the Board, and making recommendations to the Board regarding any changes to the
    2001 Non-Employee Directors Stock Plan, as amended; and

    evaluating
    its own performance annually.

The Audit Committee

        Ms. Esteves, Chair, Mr. Brennan, Mr. Diery and Mr. Fitzsimmons are the members of the Company’s Audit Committee. The Audit Committee
was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. All of the members of the Company’s Audit Committee are independent (as independent is
defined in the New York Stock Exchange’s listing standards). The Board of Directors has determined that there is at least one audit committee financial expert serving on the Audit Committee.
Ms. Esteves is the named audit committee financial expert. The primary purpose of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s financial reporting
process and its responsibilities include, but are not limited to:

    monitoring
    the integrity of the Company’s financial statements;

    ensuring
    the Company’s compliance with legal and regulatory requirements;

    retaining
    and, if appropriate, dismissing the independent accountants;

    establishing
    the qualifications, and monitoring the independence and performance of the Company’s independent accountants;

    monitoring
    the performance of the Company’s internal audit function; and

    assessing
    the adequacy of the Company’s systems of internal accounting and financial controls.

        The Audit Committee has (1) reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31,
2004 with the Company’s management, (2) discussed with the Company’s independent accountants, Deloitte & Touche LLP, the matters required to be discussed by Statement of Auditing
Standard 61, as may be amended, (3) received the written disclosures and the letter from Deloitte & Touche LLP required by Independence Standards Board Standard No. 1, as may be
amended, and (4) discussed with Deloitte & Touche LLP their independence as the Company’s independent accountants.

        In
reliance on the review and discussions outlined above, the Audit Committee recommended to the Board of Directors and the Board of Directors recommended that the audited consolidated
financial statements for the fiscal year ended December 31, 2004 be included in the Company’s 2004 Annual Report on Form 10-K for the fiscal year ended December 31,
2004 for filing with the Securities and Exchange Commission.

                        Audit
                        Committee:
                        Irene M. Esteves, Chair
                        John F. Brennan
                        Ian W. Diery
                        John A. Fitzsimmons

7

        Deloitte & Touche LLP will audit the consolidated financial statements of the Company for the year ending December 31, 2005 and will report the
results of the audit to the Audit Committee of the Board of Directors. A representative of Deloitte & Touche LLP will be present at the Annual Meeting, and will have the opportunity to make a
statement if he or she desires and to respond to appropriate questions.

        The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively
“Deloitte”) for professional fees rendered in each of the fiscal years ended December 31, 2004 and December 31, 2003 were as follows:

    $1,714,000 and $912,000, respectively, for professional services necessary to perform an audit in accordance with
the standards of the Public Company Accounting Oversight Board, including services rendered for the Company’s annual financial statements (including services incurred with rendering an opinion under
Section 404 of the Sarbanes-Oxley Act of 2002) and for reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q. Also includes fees for
services that are normally incurred in connection with statutory and regulatory filings or engagements, such as comfort letters, statutory audits, attest services, consents and review of documents
filed with the Securities and Exchange Commission;

    $216,500 and $40,800, respectively, for assurance and related services that were reasonably related to
the performance of services specified under Audit Fees but not included in Audit Fees. These services consisted of services performed relating to employee benefit plans;

    $312,200 and $422,000, respectively, for professional services rendered for tax compliance, tax advice, and tax
planning; and

    $103,600 and $445,000, respectively, for products and services other than the services specified under Audit
Fees, Audit-Related Fees and Tax Fees. These products and services primarily consisted of customs and duty related services and services related to our expatriate and other employee programs.

        In
accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee established policies and procedures under which all audit and non-audit services performed by the
Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. During fiscal 2004, a fee totaling $5,171, or less than one percent of total fees, was paid
to Deloitte for a small engagement in a foreign location that was not pre-approved, but was approved by the Audit Committee promptly after the inadvertent omission from
pre-approval was noticed.

        As part of its responsibility for oversight of the independent accountants, the Audit Committee has established a pre-approval policy for engaging
audit and permitted non-audit services provided by the Company’s independent accountants, Deloitte. In accordance with this policy, each type of audit, audit-related, tax and other
permitted service to be provided by the independent accountants is specifically described and each such service, together with a fee level or budgeted amount for such service, is
pre-approved annually by the Audit Committee. The Audit Committee has delegated pre-approval authority to its Chair to pre-approve additional non-audit
services (provided such services are not prohibited by applicable law) up to a pre-established aggregate dollar limit. All services pre-approved by the Chair of the Audit
Committee must be presented at the next Audit Committee meeting for their review and ratification.

8


Directors’ Compensation

        Directors who are also employees of the Company do not receive any compensation for serving as directors. Fees paid to directors who are not employees of the
Company are set forth below:

Fee

 
2005
 
2004

Annual retainer for director
 
$
30,000
 
$
25,000

Annual retainer for Lead Director
 
 
15,000
 
 

Each Board of Directors meeting attended
 
 
2,000
 
 
1,000

Annual retainer for committee chairperson
 
 
7,500
 
 
2,500

Each committee meeting attended
 
 
1,000
 
 
1,000

        In
2004, Robert M. Agate and Abraham Zaleznik retired as directors. In accordance with the terms of the 2001 Non-Employee Directors Stock Plan, as amended, they forfeited unvested stock
options. In consideration of this forfeiture as well as in recognition of their long and distinguished service to the Company, the Company made a cash award of $150,000 to each of them.

        Under
the Company’s 2001 Non-Employee Directors Stock Plan, as amended, effective January 1, 2005, directors who are not employees of the Company are automatically
granted options to purchase a number of shares of Class A Common Stock. Newly elected or appointed directors will receive an initial award of options to purchase a number of shares of
Class A Common Stock on the date of election or appointment calculated by multiplying the then current annual director’s retainer by ten and applying the quarterly adjusted Black-Scholes option
pricing model using the fair market value of the Class A Common Stock on the date of grant. On each anniversary of the initial award an annual award will be made using the same formula except
that the current annual director’s retainer will be multiplied by five. All of these stock options have an exercise price equal to the fair market value on the date of grant, and initial awards are
exercisable at the rate of 331/3% of the total underlying shares on each of the first three anniversaries of the date of grant and annual awards are exercisable with respect to 100% of
the underlying shares on the first anniversary of the date of grant for so long as the director remains a director of the Company. Prior to January 1, 2005, newly elected or appointed directors
received an initial award of options to purchase 10,000 shares and on each anniversary of the initial award received an award of options to purchase 2,500 shares. These options are exercisable at the
rate of 25% of the total underlying shares on each of the first four anniversaries of the date of
grant for so long as the director remains a director of the Company. All options expire ten years from the date of grant or when the holder ceases to be a director, if earlier, unless the director has
at least 10 years of service and retires or voluntarily terminates service in which case vested options will remain exercisable for the life of the options.

        During
2004, the Company granted the following stock options to its non-employee directors:

Director

 
Number of Shares
 
Date of Grant
 
Exercise Price

John E. Beard
 
2,500
 
September 13, 2004
 
$
57.25

John F. Brennan
 
2,500
 
May 26, 2004
 
$
61.61

Ian W. Diery
 
2,500
 
May 17, 2004
 
$
58.64

Irene M. Esteves
 
2,500
 
June 23, 2004
 
$
64.39

John A. Fitzsimmons
 
2,500
 
May 17, 2004
 
$
58.64

Virginia H. Kent
 
2,500
 
May 20, 2004
 
$
59.02

Bill Shore
 
2,500
 
March 1, 2004
 
$
62.87

        See
the section of this Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management” for information as to ownership of Company securities by directors and
nominees for director.

9




EXECUTIVE COMPENSATION

Summary Compensation Table

        The following table lists the compensation awarded to, earned by or paid to the Chief Executive Officer and the four other most highly compensated executive
officers of the Company who served as such at December 31, 2004 (the “Named Executive Officers”), for the fiscal years ended December 31, 2004, 2003 and 2002.

 
 
 
 
Annual Compensation
 
Long Term
Compensation

 
 
Name and
Principal Position
(a)

 
Year
(b)

 
Salary
($)
(c)

 
Bonus
($)
(d)

 
Other
Annual
Compen-
sation(1)
($)
(e)

 
Restricted
Stock
Awards(2)
($)
(f)

 
Securities
Underlying
Options
(#)
(g)

 
LTIP
Payouts(7)
($)
(h)

 
All Other
Compen-
sation(3)
($)
(i)

Jeffrey B. Swartz
President and Chief
Executive Officer
 
2004
2003
2002
 
737,500
687,500
650,000
 
1,425,900
1,750,000
650,000
 
179,223
283,624
229,047
 

3,587,023
717,500
 
75,000
90,000
100,000
 
4,594,140


 
8,606
6,714
7,482

Kenneth P. Pucker
Executive Vice President and Chief Operating Officer

 

2004
2003
2002

 

491,250
456,250
425,769

 

950,641
1,272,500
430,000

 

29,583
13,661
521,190

 


2,241,553
709,600

 

45,000
70,000
75,000

 

7,157,000



 

7,391
6,474
6,856

Brian P. McKeon(4)
Executive Vice President—Finance and Administration, Chief Financial Officer

 

2004
2003
2002

 

386,250
368,750
334,000

 

741,500
937,500
437,500

 





 





 

35,000
60,000
25,000

 

1,316,987



 

6,839
6,383
6,340

Gary S. Smith(5)
Senior Vice President—
Supply Chain Management

 

2004
2003
2002

 

346,187
332,313
295,077

 

532,359
669,500
387,863

 





 





 

20,000
15,000
60,000

 

980,083



 

3,499
3,547
2,916

Michael J. Harrison(6)
Senior Vice President—International

 

2004
2003
2002

 

345,100
63,180


 

527,491
186,000


 

54,947
21,159


 





 

13,000
60,000


 

1,316,987



 

5,320
116

(1)
This
column includes the aggregate incremental cost to the Company of providing various perquisites and personal benefits in excess of reporting thresholds, including: for use of the
Company plane: Jeffrey Swartz, $163,215, $210,926 and $184,307 for 2004, 2003 and 2002, respectively. For Mr. Pucker, in 2002 it includes $222,083, paid by the Company for income taxes owed on
$261,758, which is the amount of principal on a loan by the Company to Mr. Pucker forgiven in March of 2002. For Mr. Pucker in 2004, 2003, and 2002, it includes $29,583, $13,661,
and $32,272, respectively, which is comprised of reimbursement for income taxes payable on imputed income associated with the loan from the Company to Mr. Pucker. Mr. Pucker paid the
outstanding balance of the loan to the Company on November 17, 2004. For additional information, see “Certain Relationships and Related Transactions”. For Mr. Harrison, it includes
relocation expenses of $47,947 and $21,159 paid during 2004 and 2003, respectively, including payments for income taxes owed for such reimbursement.

(2)
This
column shows the market value of restricted stock awards on the date of grant. The Management Development and Compensation Committee in 2004 awarded 57,319 shares of restricted
stock to Mr. Swartz and 35,819 shares of restricted stock to Mr. Pucker that were intended to be performance based awards under the 1997 Incentive Plan, as amended, related to the
achievement in 2003 of certain financial measures that were established by the Management Development and Compensation Committee in 2003 pursuant to a restricted stock program. The Board of Directors
in 2003 and 2002 approved awards of 30,000 shares of restricted stock and 25,000 shares of restricted stock, respectively, to Mr. Swartz and 25,000 shares of restricted stock and 20,000 shares
of restricted stock, respectively, to Mr. Pucker, and in 1999 approved an award of 136,000 shares of restricted stock to Mr. Pucker. The aggregate holdings and market value of restricted
stock held on December 31, 2004 was: Mr. Swartz, 85,653 shares/$5,367,874 and Mr. Pucker, 52,486 shares/$3,289,298. Under their respective Restricted Stock Award Agreements,
Mr. Swartz and Mr. Pucker have the same voting and dividend rights on such shares as all other shares of Class A Common Stock. The restrictions on shares awarded to
Mr. Pucker in 1999 and 2002 lapsed in 2004. The restrictions on shares awarded to Mr. Swartz in 2003 and 2002 lapse in equal installments on each of the first three anniversaries of the
date of grant as do the restrictions on shares awarded to Mr. Pucker in 2003. The restrictions on shares awarded to Mr. Swartz and Mr. Pucker in 2004, earned for the achievement
of certain financial measures established and achieved in 2003, lapse in equal installments on each of the third and fourth anniversaries of the date of grant.

10

(3)
The
Company paid group term life insurance premiums and made contributions to the Company’s 401(k) Plan, as follows:

 
 
Group Term Life
Insurance Premiums

 
Contributions to
401(k) Plan

Name

 
2004
 
2003
 
2002
 
2004
 
2003
 
2002

Jeffrey B. Swartz
 
$
2,106
 
$
714
 
$
1,482
 
$
6,500
 
$
6,000
 
$
6,000

Kenneth P. Pucker
 
 
1,403
 
 
474
 
 
971
 
 
5,988
 
 
6,000
 
 
5,885

Brian P. McKeon
 
 
1,102
 
 
383
 
 
762
 
 
5,737
 
 
6,000
 
 
5,578

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Gary S. Smith
 
 
988
 
 
342
 
 
741
 
 
2,511
 
 
3,205
 
 
2,175

Michael J. Harrison
 
 
985
 
 
116
 
 

 
 
4,335
 
 

 
 

(4)
Mr. McKeon
was the Company’s Senior Vice President—Finance and Administration until May 2002.

(5)
Mr. Smith
joined the Company in February 2002.

(6)
Mr. Harrison
joined the Company in October 2003.

(7)
The
Management Development and Compensation Committee (“MDCC”), as well as the Board in the case of the Chief Executive Officer, approved in March 2005 awards of shares of
restricted stock to Messrs. Swartz, McKeon, Smith and Harrison with the equivalent dollar value of $4,594,140, $1,316,987, $980,083, and $1,316,987, respectively, for achievement of performance
objectives for 2004 under the 2004 Executive Long-Term Incentive Program. The actual number of shares of restricted stock will be determined and paid out to these executives on
July 5, 2005 by dividing the dollar amount awarded to each by the closing market price of the Company’s Class A Common Stock on such date. The MDCC also approved in March 2005 an
award of 100,000 shares of restricted stock to Mr. Pucker for achievement of a performance objective for 2004 under the 2004 Long-Term Incentive Program for Kenneth P. Pucker that
will also be paid out on July 5, 2005. For purposes of reporting a value for Mr. Pucker’s award in this column, the value is based on the closing market price of the Company’s
Class A Common Stock on March 2, 2005, the award approval date. All of these awards of restricted stock will be subject to vesting periods. See additional information below under the
“Long-Term Incentive Plans—2004 Award” heading.

Option Grants in Last Fiscal Year

        The following table sets forth information regarding grants of stock options to the Named Executive Officers during the fiscal year ended December 31,
2004.

Individual Grants
 
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
for Option Term(1)

Name
(a)

 
Number of
Securities
Underlying
Options
Granted
(#)
(b)

 
Percent of
Total
Options
Granted to
Employees
in Fiscal
Year
(%)
(c)

 
Exercise
or Base
Price
($/Sh)(2)
(d)

 
Expiration
Date
(e)

 
5%
($)
(f)

 
10%
($)
(g)

Jeffrey B. Swartz
 
75,000
 
10.7
 
62.58
 
3/3/14
 
2,951,717
 
7,480,230

Kenneth P. Pucker
 
45,000
 
6.4
 
62.58
 
3/3/14
 
1,771,030
 
4,488,138

Brian P. McKeon
 
35,000
 
5.0
 
62.58
 
3/3/14
 
1,377,468
 
3,490,774

Gary S. Smith
 
20,000
 
2.8
 
62.58
 
3/3/14
 
787,125
 
1,994,728

Michael J. Harrison
 
13,000
 
1.8
 
62.58
 
3/3/14
 
511,631
 
1,296,573

(1)
Based
on the exercise price on the date of grant and annual appreciation of such price through the expiration date of such options at an annualized rate of 5% and 10%. The actual
value, if any, that an optionee may realize upon exercise will depend on the excess of the market price for the Class A Common Stock over the option exercise price on the date the option is
exercised. There is no assurance that the actual value realized by an optionee upon the exercise of an option will be at or near the value estimated above.

11

(2)
All
stock options granted in 2004 to the Named Executive Officers have an exercise price equal to the fair market value on the date of grant and are exercisable at the rate of 25% of
the total underlying shares on each of the first four anniversaries of the date of grant.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

        The following table sets forth information for each of the Named Executive Officers as to the total number of exercised and unexercised stock options held at
December 31, 2004 and the value of unexercised “in-the-money” stock options held at December 31, 2004.

Name
(a)

 
Shares
Acquired
on
Exercise
(#)
(b)

 
Value
Realized
($)
(c)

 
Number of Securities
Underlying
Unexercised Options
at Fiscal Year-End
Exercisable/Unexercisable
(#)
(d)

 
Value of Unexercised
“In-the-Money” Options
at Fiscal Year-End(1)
Exercisable/Unexercisable
($)
(e)

Jeffrey B. Swartz
 
523,500
 
21,957,266
 
185,300/207,500
 
4,854,476/3,051,050

Kenneth P. Pucker
 
67,750
 
2,114,393
 
30,000/145,000
 
170,100/2,324,625

Brian P. McKeon
 
97,500
 
2,968,063
 
30,000/97,500
 
440,550/1,437,875

Gary S. Smith
 

 

 
33,750/61,250
 
904,575/1,084,125

Michael J. Harrison
 

 

 
15,000/58,000
 
175,200/526,770

(1)
Stock
options are “in-the-money” if the fair market value of the Class A Common Stock exceeds the exercise price of the stock option. The amounts shown
in column (e) represent the difference between the closing price of the Company’s Class A Common Stock on December 31, 2004 ($62.67) and the exercise price of those options which
are “in-the-money” on that date, multiplied by the applicable number of underlying securities.

Long-Term Incentive Plans—2004 Award

        The following table provides information about target awards made to each of the Named Executive Officers during 2004 under two long-term incentive
programs, effective January 1, 2004. Each of the plans contains pre-established performance objectives corresponding to a performance period.

12


The
final payment value, if any, of the target awards will be determined based on Company performance that meets or exceeds the performance objectives for the stated performance periods.

 
 
 
 
 
 
Estimated Future Payouts Under Non-Stock
Price-Based Plans

 
 
Number of
Shares,
Units or
Other Rights
(#)
(b)

 
 
Name
(a)

 
Performance or
Other Period
Until Maturation
or Payout
(c)

 
Threshold
($ or #)
(d)

 
Target
($ or #)
(e)

 
Maximum
($ or #)
(f)

Jeffrey B. Swartz (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
1,875,000
1,940,500
2,008,500
 
3,750,000
3,881,000
4,017,000
 
5,625,000
5,821,500
6,025,500

Kenneth P. Pucker (2),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 



 
100,000 shares

3,000,000
 
100,000 shares

3,000,000

Brian P. McKeon (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
537,500
556,500
576,000
 
1,075,000
1,113,000
1,152,000
 
1,612,500
1,669,500
1,728,000

Gary S. Smith (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
400,000
414,000
428,500
 
800,000
828,000
857,000
 
1,200,000
1,242,000
1,285,500

Michael J. Harrison (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
537,500
556,500
576,000
 
1,075,000
1,113,000
1,152,000
 
1,612,500
1,669,500
1,728,000

(1)
Awards
established under the 2004 Executive Long-Term Incentive Program (the “2004 LTIP”). The 2004 LTIP was established under the Company’s 1997 Incentive Plan, as amended, and
amounts awarded under the 2004 LTIP are intended to qualify as performance based compensation under Section 162(m) of the Internal Revenue Code. Under the 2004 LTIP, award opportunities for
one, two and three year performance periods commenced on January 1, 2004. Earnings per share and revenue performance measures were established for the one, two and three year performance
periods. These measures contain a threshold, target and maximum performance objective that must be met or exceeded in order to earn a specified level of award associated with attainment of that
objective, as shown above in the table for each performance period. For each performance period, a dollar value was assigned to each level of award for each participating executive officer that will
be increased proportionately to the extent the threshold or target objective is exceeded, but in no event may an award exceed the maximum level of award, as shown above in the table. Upon the grant of
an award, the earned dollar value will be converted to a number of shares of restricted stock of the Company’s Class A Common Stock having an equivalent value. Shares awarded under the 2004 one
year performance period will vest in thirds on the first, second and third anniversaries of the date of grant. Shares awarded under the two and three year performance periods, if any, will vest in
full on the third anniversary of the date of grant.

(2)
Awards
established under the 2004 Long-Term Incentive Program for Kenneth P. Pucker (the “COO 2004 LTIP”). The COO 2004 LTIP was established under the Company’s 1997 Incentive Plan,
as amended, and amounts awarded under the COO 2004 LTIP are intended to qualify as performance based compensation under Section 162(m) of the Internal Revenue Code. Under the COO 2004 LTIP,
award opportunities for one and three year performance periods commenced on January 1, 2004. Earnings per share performance measures were established for the one and three year performance
periods. These measures contain a target performance objective that must be met in order to earn the award associated with the attainment of that objective, as shown above in the table for each
performance period. No awards will be made for performance not meeting the target and no increase will be made to award amounts for performance exceeding the targets. Shares awarded under the 2004 one
year performance period will vest in full on the second anniversary of the date of grant.

(3)
The
Management Development and Compensation Committee of the Board of Directors, which administers both of the 2004 long-term incentive programs described above,
determined that performance measures for the 2004 one year performance period (i) exceeded the target objective under the 2004 LTIP and (ii) met the target objective under the COO 2004
LTIP, and approved the awards to be made to the participating executive officers under the respective programs. These awards are shown in the Summary Compensation Table under the LTIP Payout column,
but the actual grant date for all of these awards will be July 5, 2005. For the awards expressed with a dollar value under the 2004 LTIP, these will be converted to a number of shares of
restricted

13

    stock
    of the Company’s Class A Common Stock having the equivalent value, based on the closing price quoted on the New York Stock Exchange on July 5, 2005.

Equity Compensation Plan Information

Plan Category

 
Number of securities
to be issued
upon exercise of
outstanding
options,
warrants and rights

 
Weighted-average
exercise price of
outstanding options,
warrants and rights

 
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))

 
 
(a)
 
(b)
 
(c)

Equity compensation plans approved by security holders
 
2,990,240
 
$
44.08
 
1,522,412

Equity compensation plans not approved by security holders
 

 
 

 

 
Total
 
2,990,240
 
$
44.08
 
1,522,412

Change of Control Arrangements

        The Company has entered into change of control severance agreements with Jeffrey B. Swartz, Kenneth P. Pucker, Brian P. McKeon, Gary S. Smith and Michael J.
Harrison (“Covered Officers”) pursuant to approval from the Board of Directors. In the event (i) Sidney W. Swartz, Jeffrey B. Swartz, the lineal descendants of Jeffrey B. Swartz, the Sidney W.
Swartz 1982 Family Trust and any other trust or foundation controlled by Sidney W. Swartz and/or Jeffrey B. Swartz (collectively the “Swartz Family”) cease to hold the voting power to elect a majority
of the members of the Board of Directors, or all or substantially all of the Company’s assets are transferred to an unrelated third party, or the Company is liquidated (each a “Change of Control”) and
(ii) the employment of a Covered Officer is terminated within 24 months following a Change of Control other than for cause or due to a change in responsibilities, reduction in
compensation or other benefits, relocation or certain other adverse events,
then the Covered Officer would be entitled to a lump sum payment of two times the sum of (i) the Covered Officer’s annual base salary and (ii) the average of the annual bonuses earned by
the Covered Officer for the previous three full fiscal years, plus 24 months of benefits following the date of termination of employment. In addition, a Covered Officer may terminate his or her
employment voluntarily during the 13th full calendar month following a Change of Control and, under certain conditions, the Company will pay one-half of the amount specified
above and provide 12 months of benefits. In the event of a Change of Control, options become immediately exercisable. Payments or benefits paid pursuant to a Change of Control severance
agreement that are subjected to certain taxes will, under certain circumstances, be reimbursed by the Company.

14

Performance Graph

        The following graph shows the five-year cumulative total return of Class A Common Stock as compared with the Standard & Poor’s 500 Stock
Index and the weighted average of the Standard & Poor’s Footwear Index and the Standard & Poor’s Apparel, Accessories and Luxury Goods Index. The total return for the Company is weighted
in proportion to the percent of the Company’s revenue derived from sales of footwear and from apparel and accessories (excluding royalties on products sold by licensees), respectively, for each year.

 
 
1999(1)
 
2000
 
2001
 
2002
 
2003
 
2004

Timberland
 
100.00
 
252.96
 
140.26
 
134.70
 
196.96
 
237.05

S&P 500 Index
 
100.00
 
90.90
 
80.09
 
62.39
 
80.29
 
89.03

Weighted Average of S&P 500 Footwear Index and S&P 500 Apparel, Accessories and Luxury Goods Index
 
100.00
 
120.58
 
125.45
 
107.27
 
152.14
 
199.27

(1)
Indexed
to December 31, 1999.

15

Management Development and Compensation Committee Report on Executive Compensation

        The Management Development and Compensation Committee (the “Committee”) consists of Ms. Kent, Chair, Ms. Esteves and Mr. Fitzsimmons. The
Committee’s responsibilities are discussed above under the heading “Committees of the Board of Directors and Board of Directors Independence.”

        The
Committee attempts to set annual salary levels for the Company’s executive officers, including the Chief Executive Officer, at the competitive mid-point of the salaries
of executives in comparable positions at similar companies. The Committee attempts to set annual bonuses and long-term incentives at levels that, when combined with annual salaries and
assuming that actual performance meets the challenging performance goals established by the Committee, will approximate the seventy-fifth percentile of the average total compensation of executives in
comparable positions at similar companies. The Committee’s decisions concerning compensation are also made in light of each executive officer’s level of responsibility, performance and other
compensation awards. The Committee uses survey data and other services provided by Company resources and an independent compensation consulting firm. The Committee has engaged an independent
compensation consulting firm to serve exclusively as advisor to the Committee.

        Cash bonuses are payable under the Company’s Short-Term Incentive Plan for Managerial Employees (“STIP”) or pursuant to the Company’s 1997 Incentive
Plan approved by the Company’s stockholders in May 1997 and amended by the stockholders in May 2001 and May 2003, and are generally intended to qualify as performance-based
awards. Pursuant to these plans, the Committee annually reviews management’s financial performance goals for the Company, job performance goals for participants and target bonus awards for such
participants, expressed as a percentage of such participants’ salaries. Annual bonuses are awarded according to a formula based upon the achievement, in whole or in part, of these Company and
individual performance goals.

        STIP
participants who have job responsibilities within the Company’s business units (as opposed to its corporate functions) are also evaluated on the business units’ achievement of some
or all of the following target measurements: revenue, operating contribution, operating ratios, gross margin rate and cash flow. The annual STIP bonuses for higher-level executives are more heavily
influenced by Company performance than are those for lower-level executives. The amount of annual bonus awards under the STIP may exceed 100% of the target bonus awards established if actual Company
performance exceeds targeted goals or, in some cases, as a result of an executive’s individual performance goals.

        In
the case of the Chief Executive Officer, the Committee approved a STIP bonus award for 2004 based entirely on the Company’s achievement of exceeding targets related to earnings per
share, cash flow, and on time line fill which is an operating ratio for measuring service and delivery of product to customers. The target bonus for the Chief Executive Officer was set at 125% of base
salary for target achievement of earnings per share, cash flow, and on time line fill. The STIP design allows for upside bonus opportunity, up to a maximum of two times the target bonus, for Company
performance exceeding target(s). As such, the target bonus may be achieved with varying levels of Company performance against the metrics. For 2004, actual Company performance exceeded targets
established for each metric. The members of the Board of Directors, excluding Sidney Swartz and Jeffrey Swartz, ratified the 2004 bonus award for Jeffrey Swartz.

16


        In 2004, the Committee shifted its strategy for delivering long-term incentive compensation for its higher-level executives from stock options to
restricted stock awards. The Committee believes that pre-established three year long-term incentive compensation plans will drive higher-level executive focus on financial
performance for periods exceeding twelve months in duration and more closely align their interests as holders of restricted stock with the long-term interests of the Company’s
stockholders. The Committee believes that restricted stock awards that are payable under these plans provide higher-level executives with greater incentive than stock options alone to create and
sustain long-term shareholder value.

        To
implement its strategy, the Committee in March 2004 adopted a 2004 Executive Long-Term Incentive Program (which excluded the Chief Operating Officer for whom a separate
long-term incentive program was adopted) which includes one, two and three year performance periods that commenced on January 1, 2004 (the “2004 LTIP”). Under the 2004 LTIP,
earnings per share and revenue performance metrics were established for each of the one, two, and three year performance periods, and eligible higher-level executives will be awarded shares of
restricted stock at the threshold,
target or maximum level based on the associated level of performance achieved with the pre-established metrics for each of the relevant periods. A dollar value was assigned to each level
of award for each participating higher-level executive under the 2004 LTIP which will be increased proportionately to the extent the threshold or target measure of performance is exceeded. Upon the
grant of an award under the 2004 LTIP, the earned dollar value will be converted to a number of shares of restricted stock of the Company’s Class A Common Stock having an equivalent value.
Under the 2004 LTIP, awards of restricted stock for the 2004 one year performance period will vest in thirds on the first, second, and third anniversaries of the date of grant. Awards of restricted
stock for the two and three year performance periods, if any, will vest in full on the third anniversary of the date of grant. More information regarding the 2004 LTIP, and the long-term
incentive program applicable to the Chief Operating Officer is contained in this document under the heading, “Long-Term Incentive Plans—2004 Award.”

        As discussed above, in 2004 the Committee and Board of Directors approved restricted stock award opportunities pursuant to long-term incentive
programs. In March 2005, the Committee approved and members of the Board, excluding Sidney Swartz and Jeffrey Swartz, ratified an award of shares of restricted stock under the 2004 LTIP for the
Chief Executive Officer with an equivalent dollar value of $4,594,140, based entirely on the Company’s achievement of the earnings per share and revenue performance metrics that exceeded target level
of performance for fiscal 2004. The grant of restricted stock to Jeffrey Swartz will be made on July 5, 2005 by converting the dollar value of his award to a number of shares of the Company’s
Class A Common Stock, on a restricted basis, having the equivalent value based on the closing price of the stock on the New York Stock Exchange on July 5, 2005. This award to Jeffrey
Swartz and awards to the other Named Executive Officers are shown as “LTIP Payouts” for 2004 in the Summary Compensation Table contained elsewhere in this document. All of these awards are intended to
qualify as a performance-based award under the 1997 Incentive Plan.

        The Committee believes that stock options are an appropriate means to compensate the Company’s lower-level executives and employees in a manner that encourages
them to identify with the long-term interests of the Company’s stockholders. Stock options are granted on the basis of competitive levels of stock options granted to employees with
comparable positions at similar companies. In 2004, prior to the Committee’s implementation of its new long-term incentive

17

compensation
strategy, Jeffrey Swartz was awarded 75,000 stock options, based on the Committee’s compensation strategy in effect at that time.

        The
Company grants stock options to certain employees at the time of hire and frequently at the time of promotion, based on their levels of responsibility. In addition, the Company may
make stock option grants to certain employees based on their individual performance. Stock options become exercisable at such times as the Committee prescribes. All stock options granted in 2004 have
an exercise price equal to the fair market value on the date of grant and the majority are exercisable at the rate of 25% of the total underlying shares on each of the first four anniversaries of the
date of grant. These stock options expire ten years from the date of grant or when the holder ceases to be an employee, if earlier, unless the employee has at least ten years of service and
voluntarily terminates employment in which case the vested options will remain exercisable for the life of the options.

        Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public company for compensation over $1.0 million paid to any
of the Company’s Chief Executive Officer and four other highest paid executive officers. However, eligible performance-based compensation awards are not subject to the deduction limits if certain
requirements are satisfied. The Committee takes the limitations of Section 162(m) into account in determining awards to executive officers and, in appropriate circumstances, may limit awards or
design them to come within the performance-based compensation exception.

 
 
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

 

 

Virginia H. Kent, Chair
Irene M. Esteves
John A. Fitzsimmons

18




SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table presents the number of shares of Class A Common Stock and Class B Common Stock beneficially owned by (i) persons known to
the Company to be beneficial owners of 5% or more of the outstanding shares of either Class A Common Stock or Class B Common Stock, (ii) each director, nominee for director and
Named Executive Officer, and (iii) all directors and executive officers as a group, as of the close of business on March 1, 2005:

 
 
Shares Owned Beneficially

 
 
Class A
 
Class B
Name and Address of Beneficial Owner(1)

 
Number(2)
 
Percent(3)
 
Number
 
Percent(3)

Judith H. Swartz, John E. Beard and Robert N. Shapiro, as Trustees of The Sidney W. Swartz 1982 Family Trust
 
267,433
 
*
 
1,610,306
 
27.4

Sidney W. Swartz
 
394,706
 
1.4
 
4,137,592
 
70.5

Goldman Sachs Asset Management, L.P. (4)
 
1,457,969
 
5.1
 

 

Jeffrey B. Swartz
 
454,727
(5)
1.6
 
123,932
(5)
2.1

Kenneth P. Pucker
 
150,914
 
*
 

 

Brian P. McKeon
 
60,912
 
*
 

 

Gary S. Smith
 
58,545
 
*
 

 

John A. Fitzsimmons
 
43,750
 
*
 

 

John F. Brennan
 
32,293
 
*
 

 

Ian W. Diery
 
28,750
 
*
 

 

Virginia H. Kent
 
28,750
 
*
 

 

Michael J. Harrison
 
18,575
 
*
 

 

John E. Beard
 
13,050
 
*
 

 

Bill Shore
 
11,875
 
*
 

 

Irene M. Esteves
 
2,500
 
*
 

 

Kenneth T. Lombard
 

 
*
 

 

Edward W. Moneypenny
 

 
*
 

 

Peter R. Moore
 

 
*
 

 

Terdema L. Ussery, II
 

 
*
 

 

All directors and executive officers as a group (22 persons)
 
1,444,418
 
5.0
 
5,871,830
 
100

*
Does
not exceed 1% of the class.

(1)
Address,
unless otherwise noted: c/o The Timberland Company, 200 Domain Drive, Stratham, NH 03885.

(2)
Amounts
include shares issuable upon the exercise of stock options which are either currently exercisable or will become exercisable on or before April 30, 2005, as follows:
Mr. Beard, 5,050; Mr. Brennan, 16,250; Mr. Diery, 28,750; Ms. Esteves, 2,500; Mr. Fitzsimmons, 43,750; Mr. Harrison, 18,250; Ms. Kent, 28,750;
Mr. McKeon, 58,750; Mr. Pucker, 87,500; Mr. Shore, 11,875; Mr. Smith, 57,500; Mr. Jeffrey Swartz, 266,550; and all executive officers and directors as a group,
764,262. Amounts also include the unvested shares awarded pursuant to Restricted Stock Awards as follows: in 2003 and 2004 to Mr. Pucker, 16,668 and 35,819 respectively, and in 2002, 2003, and
2004 to Mr. Jeffrey Swartz, 8,334, 20,000, and 57,319 respectively.

(3)
Percentages
are calculated on the basis of the amount of outstanding shares of common stock of such class plus, for each person or group, any shares such person or group has the right
to acquire on or prior to April 30, 2005.

19

(4)
Address:
30 Hudson Street, Jersey City, New Jersey 07302. Beneficial ownership as of December 31, 2004 based on a Schedule 13G dated February 9, 2005.

(5)
Amount
includes 15,600 shares of Class A Common Stock and 91,742 shares of Class B Common Stock held by Mr. Jeffrey Swartz as custodian for minor children, and
43,602 shares of Class A Common Stock held by Mr. Swartz’s spouse.

        Sidney
Swartz, his children and grandchildren beneficially own all of the Class B Common Stock. As of March 1, 2005, Sidney Swartz and The Sidney W. Swartz 1982 Family
Trust, a trust for the benefit of his family (the “Family Trust”), held, in the aggregate, approximately 67.1% of the combined voting power of the Company’s capital stock, and the Family Trust held
less than 1% of the Class A Common Stock. By virtue of this stock ownership, Sidney Swartz may be deemed to be a “control person” of the Company within the meaning of the rules and regulations
under the Securities Act of 1933, as amended, and the Family Trust influences the election of Mr. Diery, Ms. Esteves and Mr. Fitzsimmons. Jeffrey Swartz, the Company’s President
and Chief Executive Officer, is one of the beneficiaries of the Family Trust.




CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        If Sidney Swartz should die while he is an employee of the Company, the Company will pay to his wife for the three years following his death (or, if earlier,
until her death) a monthly amount equal to Mr. Swartz’s monthly salary at the time of his death.

        Jeffrey
Swartz, the Company’s President and Chief Executive Officer, is the son of Sidney Swartz.

        John
E. Beard, a member of the Company’s Board of Directors and formerly the Company’s Secretary, was a partner in the law firm of Ropes & Gray, which provides legal services to
the Company. Mr. Beard became of counsel at Ropes & Gray in January, 2001.

        In
2004, the Company affected a shelf offering of shares of its Class A Common Stock in which members of the Swartz family, trusts for the benefit of certain members of the Swartz
family, and certain charities sold an aggregate of 6,522,441 shares. The Company paid $458,571 in fees and expenses related to this offering, of which $338,055 was reimbursed to the Company by the
selling stockholders.

        The
Company loaned $250,000 in 1999 to Community Wealth Ventures, Inc. (“CWV”) of which Bill Shore, a member of the Company’s Board of Directors, serves as Chairman. The loan
bears interest at 8% per annum and had an initial term of four years which the Company agreed to extend to six years during 2002. As of December 31, 2004, $50,000 of the loan remained
outstanding. In addition, during 2002 the Company entered into a services agreement with CWV under which the Company paid $62,400 to CWV for consulting services to the Company related to developing
programs for employee volunteerism. In 2004, the Company also donated $571,839 in cash and products to Share Our Strength, a not for profit, anti-hunger and anti-poverty
organization. This donation was slightly more than 2% of Share Our Strength’s 2004 gross revenues. Mr. Shore is the founder and President of Share Our Strength. Jeffrey Swartz was appointed to
the Board of Directors of Share Our Strength in 2003.

        The
Company loaned approximately $1.1 million to Kenneth P. Pucker, Chief Operating Officer of the Company, in 2000, an amount equal to the taxes payable as a result of his
election under Section 83(b) of the Internal Revenue Code with respect to his restricted stock award in 1999. On March 1, 2001, the Board of Directors forgave $325,000 of the loan and
reimbursed Mr. Pucker $281,343 for income taxes related to such forgiveness, and authorized the Chief Executive Officer to forgive such additional loan amounts in the future, if any, as he
deems appropriate in his sole discretion. On March 28, 2002, the Company forgave an additional $261,758 of the loan and reimbursed Mr. Pucker $222,083 for income taxes related to such
forgiveness. The Company reimbursed Mr. Pucker for income taxes payable on imputed income associated with this loan, and in

20


2002,
2003 and 2004 the Company reimbursed $32,272, $13,661 and $29,583, respectively. On November 17, 2004, Mr. Pucker paid to the Company $523,517, which was the remaining principal
balance of the loan. The loan had a term of five years and bore interest at the mid-term Applicable Federal Rate.




COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

        The current members of the Management Development and Compensation Committee of the Board of Directors are Ms. Kent, Chair, Ms. Esteves and
Mr. Fitzsimmons. Mr. Beard and Dr. Zaleznik also served on this committee in early 2004. See “Certain Relationships and Related Transactions” above for information concerning
Mr. Beard.




FINANCIAL AND OTHER INFORMATION

        The Company mailed its combined 2004 Annual Report and Form 10-K to its stockholders on or about April 15, 2005. The combined 2004
Annual Report and Form 10-K includes audited financial statements, and other business information and is incorporated herein by reference.

        To
obtain a free copy of the Company’s combined Annual Report and Form 10-K for the fiscal year ended December 31, 2004, which Form 10-K was
filed by the Company with the Securities and Exchange Commission, contact the Investor Relations Department, The Timberland Company, 200 Domain Drive, Stratham, New Hampshire 03885 (telephone:
(603) 773-1212).




SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        The securities laws of the United States require the Company’s directors, its executive officers and any persons holding more than 10% of the Class A
Common Stock to report their ownership of Class A Common Stock and any changes in that ownership to the Securities and Exchange Commission. All such persons satisfied these filing requirements
during and with respect to fiscal year 2004, except that the Company inadvertently failed to file on a timely basis one report on Form 4 for each of John F. Brennan, Irene M. Esteves, Virginia
H. Kent and Jeffrey B. Swartz. With respect to the number of transactions for each Form 4 that was filed late, Mr. Brennan, Ms. Esteves and Ms. Kent each had one
transaction and Mr. Swartz had twenty-six transactions reflecting simultaneous exercise of options and sale of underlying shares. In making this disclosure, the Company has relied
solely on written representations of its directors, its executive officers and persons who previously held more than 10% of the Class A Common Stock furnished to the Company, and copies of the
reports that these persons have filed with the Securities and Exchange Commission.




OTHER BUSINESS

        The Board of Directors knows of no other matters to be presented at the Annual Meeting. If any additional matters should properly come before the Annual Meeting,
the persons appointed as proxies in the enclosed proxy intend to vote such proxy in accordance with their judgment on any such matters.




STOCKHOLDER PROPOSALS

        Proposals which stockholders intend to present at the 2006 Annual Meeting of Stockholders must be received by the Secretary of the Company no later than
February 15, 2006 to be presented at that Annual Meeting. Any proposal received after such date will be untimely and will not be considered at the 2006 Annual Meeting of Stockholders. To be
eligible for inclusion in next year’s Proxy Statement, the Secretary of the Company must receive stockholder proposals no later than December 16, 2005. In addition to these mailing
requirements, stockholder proposals also must be in compliance with applicable Securities and Exchange Commission regulations.

21

PROXY

THE TIMBERLAND COMPANY
ANNUAL MEETING OF STOCKHOLDERS—MAY 19, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

        The undersigned hereby appoints Sidney W. Swartz and Jeffrey B. Swartz, and each of them, as attorneys and proxies, with the power of substitution, to represent
and vote at the Annual Meeting of Stockholders of The Timberland Company (the “Company”) and at any adjournments thereof, all shares of the Company’s Class A Common Stock which the undersigned
could vote if present, in such manner as they, or either of them, may determine on any matters which may properly come before the meeting or any adjournments thereof and to vote on the matters set
forth on the reverse side of this proxy as directed by the undersigned. The Annual Meeting will be held on Thursday, May 19, 2005, at 9:00 a.m., at The Colonnade Hotel,
120 Huntington Avenue, Boston, Massachusetts 02116.

        A
stockholder is entitled to one vote for each share of Class A Common Stock and ten votes for each share of Class B Common Stock held of record at the close of business on
March 24, 2005. The holders of Class A Common Stock will vote separately as a class to elect three nominees for director, Ian W. Diery, Irene M. Esteves and John A. Fitzsimmons, and the
holders of Class A Common Stock and the holders of Class B Common Stock will vote together as a single class to elect eight nominees for director, Sidney W. Swartz, Jeffrey B. Swartz,
Virginia H. Kent, Kenneth T. Lombard, Edward W. Moneypenny, Peter R. Moore, Bill Shore and Terdema L. Ussery, II.

        THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED TO FIX THE NUMBER OF DIRECTORS AT ELEVEN, AND TO ELECT
ALL ELEVEN NOMINEES. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER BUSINESS NOT KNOWN AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.

SEE REVERSE
SIDE
 
CONTINUED AND TO BE SIGNED
ON REVERSE SIDE
 
SEE REVERSE
SIDE

ý
Please mark votes as
in this example.

THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.

1.
 
To fix the number of directors at eleven for the coming year, subject to further action by the Board of Directors as provided in the Company’s By-Laws, and to elect the following nominees:

 

 

NOMINEES:

 

(01) Sidney W. Swartz, (02) Jeffrey B. Swartz, (03) Ian W. Diery, (04) Irene M. Esteves, (05) John A. Fitzsimmons, (06) Virginia H. Kent, (07) Kenneth T. Lombard, (08)
 Edward W. Moneypenny, (09) Peter R. Moore, (10) Bill Shore, and (11) Terdema L. Ussery, II

FOR ALL
NOMINEES

 

WITHHELD FROM
ALL NOMINEES

o

 

o

o

 

 

 

 

For all nominees except as noted above

 

 

 

 

 

MARK BOX AT RIGHT IF YOU PLAN TO ATTEND THE ANNUAL MEETING. o

MARK BOX AT RIGHT IF AN ADDRESS CHANGE OR COMMENT HAS BEEN NOTED ON THIS
CARD. o

Please sign here personally, exactly as your name is printed on your stock certificate. If the stock certificate is registered in more than one name, each joint
owner or each fiduciary should sign personally. Only authorized officers should sign for a corporation.

 

 

 

 

 

 

 

Signature:

 

 

 

Date:

 

 

 

 

 

 

 

Signature:

 

 

 

Date:

 

 

 

 

 

 

 

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SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material Pursuant to §240.14a-12

THE TIMBERLAND COMPANY

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 
 
 
 
 

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 
 
(1)
 
Title of each class of securities to which transaction applies:
        

 
 
(2)
 
Aggregate number of securities to which transaction applies:
        

 
 
(3)
 
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        

 
 
(4)
 
Proposed maximum aggregate value of transaction:
        

 
 
(5)
 
Total fee paid:
        

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        

 
 
(2)
 
Form, Schedule or Registration Statement No.:
        

 
 
(3)
 
Filing Party:
        

 
 
(4)
 
Date Filed:
        

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

April 15,
2005

TO
THE STOCKHOLDERS:

        The
Board of Directors and Officers of The Timberland Company invite you to attend the 2005 Annual Meeting of Stockholders to be held on Thursday, May 19, 2005, at
9:00 a.m., at The Colonnade Hotel located at 120 Huntington Avenue, Boston, Massachusetts.

        A
copy of the Proxy Statement and the proxy are enclosed.

        If
you cannot be present at the meeting, please mark, date and sign the enclosed proxy and return it as soon as possible in the enclosed envelope.

 
 
        Cordially,

 

 



 

 

        SIDNEY W. SWARTZ

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS

Date:
 
Thursday, May 19, 2005

Time:

 

9:00 a.m.

Location:

 

The Colonnade Hotel
120 Huntington Avenue
Boston, Massachusetts

Purposes for Meeting:

    1.
    To
    fix the number of directors at eleven for the coming year, subject to further action by the Board of Directors as provided in the Company’s By-Laws, and to elect eleven
    directors to hold office until their successors are duly elected and qualified; and

    2.
    To
    transact such other business as may properly come before the Annual Meeting and any adjournments thereof.

        Holders
of Class A Common Stock will vote separately as a class to elect three directors. Holders of Class A Common Stock and holders of Class B Common Stock will
vote together as a single class to elect the remaining eight directors.

        You
will receive notice of and may vote and act at the Annual Meeting only if you were a stockholder of record at the close of business on Thursday, March 24, 2005.

 
 
By Order of the Board of Directors

 

 



 

 

DANETTE WINEBERG

April 15,
2005

THE TIMBERLAND COMPANY
200 Domain Drive
Stratham, New Hampshire 03885

PROXY STATEMENT
April 15, 2005

TABLE OF CONTENTS

INFORMATION CONCERNING SOLICITATION AND VOTING
 
1

 

General

 

1

 
Voting Rights and Outstanding Shares
 
1

 
Quorum
 
2

 
Required Votes and Method of Tabulation
 
2

ITEM 1. ELECTION OF DIRECTORS

 

2

 

Information with Respect to Nominees

 

3

 
Corporate Governance Principles and Code of Ethics
 
4

 
Shareholder Communications to the Board of Directors
 
4

 
Committees of the Board of Directors and Board of Directors Independence
 
5

 
The Governance and Nominating Committee
 
5

 
The Management Development and Compensation Committee
 
6

 
The Audit Committee
 
7

 
Directors’ Compensation
 
9

EXECUTIVE COMPENSATION

 

10

 

Summary Compensation Table

 

10

 
Option Grants in Last Fiscal Year
 
11

 
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
 
12

 
Long-Term Incentive Plans—2004 Award
 
12

 
Equity Compensation Plan Information
 
14

 
Change of Control Arrangements
 
14

 
Performance Graph
 
15

 
Management Development and Compensation Committee Report on Executive Compensation
 
16

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

19

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

20

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

21

FINANCIAL AND OTHER INFORMATION

 

21

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

21

OTHER BUSINESS

 

21

STOCKHOLDER PROPOSALS

 

21

i




INFORMATION CONCERNING SOLICITATION AND VOTING

General

        The Board of Directors of The Timberland Company, a Delaware corporation (“Timberland” or the “Company”), is sending you the enclosed proxy in connection with its
2005 Annual Meeting of Stockholders (the “Annual Meeting”) and any adjourned sessions of the Annual Meeting. The Annual Meeting will be held on Thursday, May 19, 2005, at 9:00 a.m., at
The Colonnade Hotel, 120 Huntington Avenue, Boston, Massachusetts. The purposes of the Annual Meeting are:

    1.
    to
    fix the number of directors at eleven for the coming year and to elect eleven directors to hold office until their successors are duly elected and qualified; and

    2.
    to
    transact such other business as may properly come before the Annual Meeting and any adjournments of the Annual Meeting.

Voting Rights and Outstanding Shares

        You may vote at the Annual Meeting only if you are a stockholder of record as of the close of business on Thursday, March 24, 2005. As of March 1,
2005, the following number of shares of the Company’s Common Stock were outstanding:

Class of Common Stock

 
Number of Shares
Outstanding

Class A Common Stock, $.01 par value (“Class A Common Stock”)
 
27,903,558

Class B Common Stock, $.01 par value (“Class B Common Stock”)
 
5,871,830

        The
Company bears all costs of solicitation of proxies. The Company may solicit proxies personally or by telephone, mail or telegram. None of the Company’s directors, officers or
employees will be specially compensated for soliciting proxies. The Company expects to mail this Proxy Statement and the enclosed proxy to stockholders on or about April 15, 2005. Unless the
Company has received instructions to the contrary, only one Annual Report or Proxy Statement, as applicable, is being delivered to multiple shareholders sharing an address. Upon written or oral
request to the Secretary of the Company, by mail at 200 Domain Drive, Stratham, New Hampshire 03885 or by telephone at (603) 772-9500, the Company will promptly deliver a copy of
the Annual Report or Proxy Statement to a shareholder if that shareholder shares an address with another shareholder to which a single copy of the applicable document was delivered. To receive a
separate Annual Report or Proxy Statement, as applicable, in the future, contact the Secretary of the Company as described above. To request delivery of a single copy of an Annual Report or Proxy
Statement for a household currently receiving multiple copies of Annual Reports or Proxy Statements, contact the Secretary of the Company as described above.

        To
vote your shares at the Annual Meeting, you must properly sign, date and return the enclosed proxy. You may specify in the proxy how you want to vote your shares. If you sign and
return your proxy but do not specify how to vote your shares, then your shares will be voted to fix the number of directors at eleven and to elect all eleven nominees.

        You
may revoke your proxy at any time before the Annual Meeting by either:

    attending
    the Annual Meeting and voting in person;

    filing
    with the Secretary of the Company an instrument in writing revoking your proxy; or

    delivering
    to the Secretary a newly executed proxy bearing a later date.

        If
a nominee for director is unable to serve as a director, the persons appointed as proxy for the Annual Meeting may, in his, her or their discretion, vote for another person as
director or vote to

1


reduce
the number of directors to less than eleven, as the Board of Directors may recommend. The Company believes that all of the nominees will be available for election.

        The
Board of Directors knows of no other matters to be presented at the Annual Meeting. If any additional matters should properly come before the Annual Meeting, the persons appointed as
proxy to vote on such matters intend to vote in accordance with his, her or their judgment.

Quorum

        A quorum of the Company’s stockholders must be present, whether by proxy or in person, for the Annual Meeting to occur. Consistent with Delaware law and under the
Company’s By-Laws, a majority of the voting power of shares entitled to be cast on a particular matter constitutes a quorum.

        To
determine the presence of a quorum, the following will count as shares present:

    shares
    represented by proxies that withhold authority to vote for a nominee for director;

    shares
    represented by proxies that indicate an abstention to vote for a nominee for director; or

    a
    “broker non-vote” (shares held by your brokers or nominees as to which (i) you have not provided voting instructions and (ii) the broker or
    nominee does not have discretionary voting power).

Required Votes and Method of Tabulation

        You are entitled to one vote for each share of Class A Common Stock you hold and entitled to ten votes for each share of Class B Common Stock you
hold. Holders of Class A Common Stock will vote separately as a class to elect nominees Ian W. Diery, Irene M. Esteves and John A. Fitzsimmons. Holders of Class A Common Stock and
holders of Class B Common Stock will vote together as a single class to elect nominees Sidney W. Swartz, Jeffrey B. Swartz, Virginia H. Kent, Kenneth T. Lombard, Edward W. Moneypenny, Peter R.
Moore, Bill Shore and Terdema L. Ussery, II.

        The
Company will appoint election inspectors who will count the votes cast by proxy or in person at the Annual Meeting. The eleven nominees for election as directors who receive the
greatest number of votes properly cast will be elected.




ITEM 1. ELECTION OF DIRECTORS

        The directors elected at each Annual Meeting serve for the following year and until their respective successors are duly elected and qualified. The Company’s
By-Laws specify that the Board of Directors or the stockholders may determine the number of directors of the Company. The stockholders or the Board of Directors may increase the number of
directors fixed at the Annual Meeting and may fill any vacancy arising on the Board of Directors.

        The
current Board of Directors consists of nine members. All current directors are nominees for director at the Annual Meeting, except for John E. Beard and John F. Brennan who have each
attained the Board of Directors’ mandatory retirement age of 72. The incumbent directors were elected at the 2004 Annual Meeting of Stockholders.

2


Information with Respect to Nominees

        The names, ages, principal occupations during the past five years and certain other information with respect to the nominees for election are as follows:

Name and Year
First Elected Director

 
Age
 
Principal Occupation During the Past Five Years
and Directorships of Other Public Companies


Sidney W. Swartz (1978)

 

69

 

Sidney Swartz has been the Company’s Chairman of the Board since June 1986. Sidney Swartz also was the Company’s Chief Executive Officer and President from June 1986 until June 1998.

Jeffrey B. Swartz (1990)

 

45

 

Jeffrey Swartz has been the Company’s President and Chief Executive Officer since June 1998. Jeffrey Swartz is the son of Sidney Swartz.

Ian W. Diery (1996)

 

55

 

Mr. Diery has been the President and Chief Executive Officer of Electronic Scrip, Inc. since November 1997.

Irene M. Esteves (2003)

 

46

 

Ms. Esteves was Senior Managing Director, Chief Financial Officer and Chief of Human Resources at Putnam Investments from July 2003 through April 2004. Prior to that, she served as Putnam’s Chief Financial Officer from 1997. Ms.
Esteves serves as a director of Johnson Diversey, Inc.

John A. Fitzsimmons (1996)

 

62

 

Mr. Fitzsimmons was the Senior Vice President—Consumer Electronics of Circuit City Stores, Inc. from January 1987 until his retirement in June 2000.

Virginia H. Kent (1999)

 

50

 

Ms. Kent is an independent consultant and was the President and Chief Executive Officer of reflect.com from December 1999 until June 2002. Prior to this, Ms. Kent served at Hasbro Corporation in a variety of positions, most recently as
President—U.S. Toy Group.

Kenneth T. Lombard

 

50

 

Mr. Lombard has been the President of Starbucks Entertainment, a business unit of Starbucks Coffee Company, since 2004. From 1992 to 2004, Mr. Lombard was the co-founder and President of Johnson Development Company.

 
 
 
 
 

3



Edward W. Moneypenny

 

63

 

Mr. Moneypenny has been the Senior Vice President—Finance and Chief Financial Officer of 7-Eleven, Inc. since 2002. In 2001, Mr. Moneypenny served as the Executive Vice President—Finance and Chief Financial Officer of Covanta Energy
Corporation and served from 1999 to 2000 as the Senior Vice President—Finance and Chief Financial Officer of Florida Progress Corporation.

Peter R. Moore

 

50

 

Since 2003, Mr. Moore has been employed by the Home and Entertainment Division of Microsoft Corporation, first as Corporate Vice President of Worldwide Retail Sales and Marketing and currently as Corporate Vice President. From 1999 to 2003, Mr. Moore
served first as Senior Vice President of Marketing and then as President and Chief Operating Officer of Sega of America Dreamcast, Inc.

Bill Shore (2001)

 

50

 

Mr. Shore founded Share Our Strength in 1984 and is currently its President. Mr. Shore is also Chairman of Community Wealth Ventures, Inc., a for-profit subsidiary of Share Our Strength.

Terdema L. Ussery, II

 

46

 

Mr. Ussery has been the President and Chief Executive Officer of the Dallas Mavericks since 1997. Mr. Ussery has also been the Chief Executive Officer of HDNet since 2001.

Corporate Governance Principles and Code of Ethics

        The Board of Directors has established corporate governance principles for the Board and committees of the Board to follow regarding effective corporate
governance and compliance with laws and regulations. The corporate governance principles require the Board to appoint a Lead Director if the Chairman of the Board of Directors is not independent.
Since Sidney W. Swartz is not independent, the Board of Directors appointed Irene M. Esteves as the Lead Director in 2004. The Lead Director, among other duties, assists the Board and Company
management in setting the agenda for each meeting of the Board of Directors.

        The
Company has also adopted a Code of Ethics that applies to all directors, executives, and employees of the Company to deter wrongdoing and promote ethical conduct, compliance with law
and internal reporting of wrongdoing. These documents and the charter for each of the committees of the Board of Directors are available on the Company’s website, www.timberland.com, and may also be
obtained by writing to the Company’s Secretary, 200 Domain Drive, Stratham, New Hampshire 03885.

Shareholder Communications to the Board of Directors

        Shareholders may send communications to the non-management members of the Board of Directors. Shareholders may send their written communications to
the Secretary of the Company at 200 Domain Drive, Stratham, New Hampshire 03885 and all communications will be given directly to

4


the
non-management directors unless they would be more appropriately addressed by other departments within the Company, such as customer or vendor services.

Committees of the Board of Directors and Board of Directors Independence

        The Board of Directors has a Governance and Nominating Committee, a Management Development and Compensation Committee, and an Audit Committee. While the Company
believes that the majority of the members of its Board of Directors are independent, the Company is exempt from the listing standards of the New York Stock Exchange requiring that a majority of the
Board of Directors be independent and that all of the members of the compensation and nominating committees be independent. The Company is relying on the “controlled company” exemption provided by the
New York Stock Exchange based on the fact that more than 50% of the voting power of the Company’s voting stock is held by Sidney W. Swartz and The Sidney W. Swartz 1982 Family Trust (the Company is
therefore a “controlled company” as defined in the New York Stock Exchange’s listing standards). During 2004, the Board of Directors and its committees held the following number of meetings:

 
 
2004 Meetings

Board of Directors
 
7

Governance and Nominating Committee
 
5

Management Development and Compensation Committee
 
6

Audit Committee
 
8

        All
directors attended more than 75% of the total number of meetings held in 2004 of the Board of Directors and the committees of the Board on which he or she served. Although the
Company expects all nominees for the Board of Directors to attend the Annual Meeting of Stockholders, Peter R. Moore will not be able to attend due to a scheduling conflict. All members of the Board
of Directors who were members on May 20, 2004, the date of the last Annual Meeting of Stockholders, attended the meeting.

The Governance and Nominating Committee

        The members of the Governance and Nominating Committee are Mr. Beard, Chairman, Ms. Kent and Mr. Shore. The Governance and Nominating
Committee’s responsibilities include, but are not limited to:

    reviewing
    the organization, role and structure of the Board of Directors including the nature and extent of delegation of responsibilities to committees of the Board and
    reviewing directors’ compensation;

    developing,
    reviewing, evaluating and recommending to the Board for adoption corporate governance principles applicable to the Company;

    making
    recommendations to the full Board with respect to membership on committees and chairmanship of committees;

    recommending
    to the Board guidelines and criteria for Board membership and identifying and reviewing candidates for election to the Board and making recommendations relative
    to their election as directors;

    periodically
    evaluating the composition of the Board and the effectiveness of the Board and its committees’ service to the Company, including its own performance annually;
    and

    communicating
    with management to ensure that materials and information provided to the Board are appropriate to enable the Board to fulfill its responsibilities.

5

        The
Governance and Nominating Committee has established a process for identifying and evaluating nominees for director. Although the Governance and Nominating Committee will consider
nominees recommended by shareholders, the Committee believes that the process it utilizes to identify and evaluate nominees for director is designed to produce nominees that possess the educational,
professional business and personal attributes that are best suited to further the Company’s mission. The Committee may identify nominees through the use of professional search firms that may utilize
proprietary screening techniques to match candidates to the Committee’s specified qualifications. The Committee may also receive recommendations from existing directors, executive officers, key
business partners, and trade or industry affiliations. The Committee will consider, among other factors, the following to evaluate Committee or shareholder recommended nominees: candidates’
experience, skills, and other qualifications in view of the specific needs of the Board of Directors and the Company; diversity of backgrounds, skills, and expertise; and high ethical standards,
integrity and proven business judgment. The professional search firm engaged by the Company identified Messrs. Lombard, Moneypenny, Moore and Ussery as prospective nominees to the Board of
Directors. The Company’s Chief Executive Officer discussed these nominees with the Governance and Nominating Committee. The Committee further evaluated each of these individuals based on the criteria
described above and then approved each as a nominee to the Board of Directors.

        The
Governance and Nominating Committee will consider nominations to the Board of Directors from shareholders using the same criteria described above. To be considered by the Governance
and Nominating Committee for nomination and inclusion in the Company’s proxy statement for its 2006 Annual Meeting of Stockholders, shareholder recommendations must be received by the Company’s
Secretary no later than December 16, 2005. Shareholders should write to the Company’s Secretary at 200 Domain Drive, Stratham, New Hampshire 03885 and such recommendations must include:
(i) the name and address of the candidate, (ii) a brief biographical description as well as qualifications, taking into consideration the criteria described above, and (iii) a
signed consent from the candidate indicating his or her consent to be named in the proxy statement and serve if elected.

The Management Development and Compensation Committee

        The members of the Management Development and Compensation Committee are Ms. Kent, Chair, Ms. Esteves and Mr. Fitzsimmons. The Management
Development and Compensation Committee’s responsibilities include, but are not limited to:

    determining
    and presenting to the Board of Directors, other than management directors, for its ratification the compensation of the Chairman, and of the President and Chief
    Executive Officer;

    determining
    the compensation of the executive officers who report directly to the Chief Executive Officer;

    reviewing,
    adopting and revising succession plans for the positions of Chairman, President, Chief Executive Officer and Chief Operating Officer;

    reviewing
    the general principles on which the Company bases its compensation, benefits and management development and succession policies and practices for all employees of
    the Company;

    supervising
    the administration of the Company’s 1997 Incentive Plan, as amended, and other non-stock based benefit plans;

6

    consulting
    with the Governance and Nominating Committee regarding compensation for members of the Board, and making recommendations to the Board regarding any changes to the
    2001 Non-Employee Directors Stock Plan, as amended; and

    evaluating
    its own performance annually.

The Audit Committee

        Ms. Esteves, Chair, Mr. Brennan, Mr. Diery and Mr. Fitzsimmons are the members of the Company’s Audit Committee. The Audit Committee
was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. All of the members of the Company’s Audit Committee are independent (as independent is
defined in the New York Stock Exchange’s listing standards). The Board of Directors has determined that there is at least one audit committee financial expert serving on the Audit Committee.
Ms. Esteves is the named audit committee financial expert. The primary purpose of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s financial reporting
process and its responsibilities include, but are not limited to:

    monitoring
    the integrity of the Company’s financial statements;

    ensuring
    the Company’s compliance with legal and regulatory requirements;

    retaining
    and, if appropriate, dismissing the independent accountants;

    establishing
    the qualifications, and monitoring the independence and performance of the Company’s independent accountants;

    monitoring
    the performance of the Company’s internal audit function; and

    assessing
    the adequacy of the Company’s systems of internal accounting and financial controls.

        The Audit Committee has (1) reviewed and discussed the Company’s audited consolidated financial statements for the fiscal year ended December 31,
2004 with the Company’s management, (2) discussed with the Company’s independent accountants, Deloitte & Touche LLP, the matters required to be discussed by Statement of Auditing
Standard 61, as may be amended, (3) received the written disclosures and the letter from Deloitte & Touche LLP required by Independence Standards Board Standard No. 1, as may be
amended, and (4) discussed with Deloitte & Touche LLP their independence as the Company’s independent accountants.

        In
reliance on the review and discussions outlined above, the Audit Committee recommended to the Board of Directors and the Board of Directors recommended that the audited consolidated
financial statements for the fiscal year ended December 31, 2004 be included in the Company’s 2004 Annual Report on Form 10-K for the fiscal year ended December 31,
2004 for filing with the Securities and Exchange Commission.

                        Audit
                        Committee:
                        Irene M. Esteves, Chair
                        John F. Brennan
                        Ian W. Diery
                        John A. Fitzsimmons

7

        Deloitte & Touche LLP will audit the consolidated financial statements of the Company for the year ending December 31, 2005 and will report the
results of the audit to the Audit Committee of the Board of Directors. A representative of Deloitte & Touche LLP will be present at the Annual Meeting, and will have the opportunity to make a
statement if he or she desires and to respond to appropriate questions.

        The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively
“Deloitte”) for professional fees rendered in each of the fiscal years ended December 31, 2004 and December 31, 2003 were as follows:

    $1,714,000 and $912,000, respectively, for professional services necessary to perform an audit in accordance with
the standards of the Public Company Accounting Oversight Board, including services rendered for the Company’s annual financial statements (including services incurred with rendering an opinion under
Section 404 of the Sarbanes-Oxley Act of 2002) and for reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q. Also includes fees for
services that are normally incurred in connection with statutory and regulatory filings or engagements, such as comfort letters, statutory audits, attest services, consents and review of documents
filed with the Securities and Exchange Commission;

    $216,500 and $40,800, respectively, for assurance and related services that were reasonably related to
the performance of services specified under Audit Fees but not included in Audit Fees. These services consisted of services performed relating to employee benefit plans;

    $312,200 and $422,000, respectively, for professional services rendered for tax compliance, tax advice, and tax
planning; and

    $103,600 and $445,000, respectively, for products and services other than the services specified under Audit
Fees, Audit-Related Fees and Tax Fees. These products and services primarily consisted of customs and duty related services and services related to our expatriate and other employee programs.

        In
accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee established policies and procedures under which all audit and non-audit services performed by the
Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. During fiscal 2004, a fee totaling $5,171, or less than one percent of total fees, was paid
to Deloitte for a small engagement in a foreign location that was not pre-approved, but was approved by the Audit Committee promptly after the inadvertent omission from
pre-approval was noticed.

        As part of its responsibility for oversight of the independent accountants, the Audit Committee has established a pre-approval policy for engaging
audit and permitted non-audit services provided by the Company’s independent accountants, Deloitte. In accordance with this policy, each type of audit, audit-related, tax and other
permitted service to be provided by the independent accountants is specifically described and each such service, together with a fee level or budgeted amount for such service, is
pre-approved annually by the Audit Committee. The Audit Committee has delegated pre-approval authority to its Chair to pre-approve additional non-audit
services (provided such services are not prohibited by applicable law) up to a pre-established aggregate dollar limit. All services pre-approved by the Chair of the Audit
Committee must be presented at the next Audit Committee meeting for their review and ratification.

8


Directors’ Compensation

        Directors who are also employees of the Company do not receive any compensation for serving as directors. Fees paid to directors who are not employees of the
Company are set forth below:

Fee

 
2005
 
2004

Annual retainer for director
 
$
30,000
 
$
25,000

Annual retainer for Lead Director
 
 
15,000
 
 

Each Board of Directors meeting attended
 
 
2,000
 
 
1,000

Annual retainer for committee chairperson
 
 
7,500
 
 
2,500

Each committee meeting attended
 
 
1,000
 
 
1,000

        In
2004, Robert M. Agate and Abraham Zaleznik retired as directors. In accordance with the terms of the 2001 Non-Employee Directors Stock Plan, as amended, they forfeited unvested stock
options. In consideration of this forfeiture as well as in recognition of their long and distinguished service to the Company, the Company made a cash award of $150,000 to each of them.

        Under
the Company’s 2001 Non-Employee Directors Stock Plan, as amended, effective January 1, 2005, directors who are not employees of the Company are automatically
granted options to purchase a number of shares of Class A Common Stock. Newly elected or appointed directors will receive an initial award of options to purchase a number of shares of
Class A Common Stock on the date of election or appointment calculated by multiplying the then current annual director’s retainer by ten and applying the quarterly adjusted Black-Scholes option
pricing model using the fair market value of the Class A Common Stock on the date of grant. On each anniversary of the initial award an annual award will be made using the same formula except
that the current annual director’s retainer will be multiplied by five. All of these stock options have an exercise price equal to the fair market value on the date of grant, and initial awards are
exercisable at the rate of 331/3% of the total underlying shares on each of the first three anniversaries of the date of grant and annual awards are exercisable with respect to 100% of
the underlying shares on the first anniversary of the date of grant for so long as the director remains a director of the Company. Prior to January 1, 2005, newly elected or appointed directors
received an initial award of options to purchase 10,000 shares and on each anniversary of the initial award received an award of options to purchase 2,500 shares. These options are exercisable at the
rate of 25% of the total underlying shares on each of the first four anniversaries of the date of
grant for so long as the director remains a director of the Company. All options expire ten years from the date of grant or when the holder ceases to be a director, if earlier, unless the director has
at least 10 years of service and retires or voluntarily terminates service in which case vested options will remain exercisable for the life of the options.

        During
2004, the Company granted the following stock options to its non-employee directors:

Director

 
Number of Shares
 
Date of Grant
 
Exercise Price

John E. Beard
 
2,500
 
September 13, 2004
 
$
57.25

John F. Brennan
 
2,500
 
May 26, 2004
 
$
61.61

Ian W. Diery
 
2,500
 
May 17, 2004
 
$
58.64

Irene M. Esteves
 
2,500
 
June 23, 2004
 
$
64.39

John A. Fitzsimmons
 
2,500
 
May 17, 2004
 
$
58.64

Virginia H. Kent
 
2,500
 
May 20, 2004
 
$
59.02

Bill Shore
 
2,500
 
March 1, 2004
 
$
62.87

        See
the section of this Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management” for information as to ownership of Company securities by directors and
nominees for director.

9




EXECUTIVE COMPENSATION

Summary Compensation Table

        The following table lists the compensation awarded to, earned by or paid to the Chief Executive Officer and the four other most highly compensated executive
officers of the Company who served as such at December 31, 2004 (the “Named Executive Officers”), for the fiscal years ended December 31, 2004, 2003 and 2002.

 
 
 
 
Annual Compensation
 
Long Term
Compensation

 
 
Name and
Principal Position
(a)

 
Year
(b)

 
Salary
($)
(c)

 
Bonus
($)
(d)

 
Other
Annual
Compen-
sation(1)
($)
(e)

 
Restricted
Stock
Awards(2)
($)
(f)

 
Securities
Underlying
Options
(#)
(g)

 
LTIP
Payouts(7)
($)
(h)

 
All Other
Compen-
sation(3)
($)
(i)

Jeffrey B. Swartz
President and Chief
Executive Officer
 
2004
2003
2002
 
737,500
687,500
650,000
 
1,425,900
1,750,000
650,000
 
179,223
283,624
229,047
 

3,587,023
717,500
 
75,000
90,000
100,000
 
4,594,140


 
8,606
6,714
7,482

Kenneth P. Pucker
Executive Vice President and Chief Operating Officer

 

2004
2003
2002

 

491,250
456,250
425,769

 

950,641
1,272,500
430,000

 

29,583
13,661
521,190

 


2,241,553
709,600

 

45,000
70,000
75,000

 

7,157,000



 

7,391
6,474
6,856

Brian P. McKeon(4)
Executive Vice President—Finance and Administration, Chief Financial Officer

 

2004
2003
2002

 

386,250
368,750
334,000

 

741,500
937,500
437,500

 





 





 

35,000
60,000
25,000

 

1,316,987



 

6,839
6,383
6,340

Gary S. Smith(5)
Senior Vice President—
Supply Chain Management

 

2004
2003
2002

 

346,187
332,313
295,077

 

532,359
669,500
387,863

 





 





 

20,000
15,000
60,000

 

980,083



 

3,499
3,547
2,916

Michael J. Harrison(6)
Senior Vice President—International

 

2004
2003
2002

 

345,100
63,180


 

527,491
186,000


 

54,947
21,159


 





 

13,000
60,000


 

1,316,987



 

5,320
116

(1)
This
column includes the aggregate incremental cost to the Company of providing various perquisites and personal benefits in excess of reporting thresholds, including: for use of the
Company plane: Jeffrey Swartz, $163,215, $210,926 and $184,307 for 2004, 2003 and 2002, respectively. For Mr. Pucker, in 2002 it includes $222,083, paid by the Company for income taxes owed on
$261,758, which is the amount of principal on a loan by the Company to Mr. Pucker forgiven in March of 2002. For Mr. Pucker in 2004, 2003, and 2002, it includes $29,583, $13,661,
and $32,272, respectively, which is comprised of reimbursement for income taxes payable on imputed income associated with the loan from the Company to Mr. Pucker. Mr. Pucker paid the
outstanding balance of the loan to the Company on November 17, 2004. For additional information, see “Certain Relationships and Related Transactions”. For Mr. Harrison, it includes
relocation expenses of $47,947 and $21,159 paid during 2004 and 2003, respectively, including payments for income taxes owed for such reimbursement.

(2)
This
column shows the market value of restricted stock awards on the date of grant. The Management Development and Compensation Committee in 2004 awarded 57,319 shares of restricted
stock to Mr. Swartz and 35,819 shares of restricted stock to Mr. Pucker that were intended to be performance based awards under the 1997 Incentive Plan, as amended, related to the
achievement in 2003 of certain financial measures that were established by the Management Development and Compensation Committee in 2003 pursuant to a restricted stock program. The Board of Directors
in 2003 and 2002 approved awards of 30,000 shares of restricted stock and 25,000 shares of restricted stock, respectively, to Mr. Swartz and 25,000 shares of restricted stock and 20,000 shares
of restricted stock, respectively, to Mr. Pucker, and in 1999 approved an award of 136,000 shares of restricted stock to Mr. Pucker. The aggregate holdings and market value of restricted
stock held on December 31, 2004 was: Mr. Swartz, 85,653 shares/$5,367,874 and Mr. Pucker, 52,486 shares/$3,289,298. Under their respective Restricted Stock Award Agreements,
Mr. Swartz and Mr. Pucker have the same voting and dividend rights on such shares as all other shares of Class A Common Stock. The restrictions on shares awarded to
Mr. Pucker in 1999 and 2002 lapsed in 2004. The restrictions on shares awarded to Mr. Swartz in 2003 and 2002 lapse in equal installments on each of the first three anniversaries of the
date of grant as do the restrictions on shares awarded to Mr. Pucker in 2003. The restrictions on shares awarded to Mr. Swartz and Mr. Pucker in 2004, earned for the achievement
of certain financial measures established and achieved in 2003, lapse in equal installments on each of the third and fourth anniversaries of the date of grant.

10

(3)
The
Company paid group term life insurance premiums and made contributions to the Company’s 401(k) Plan, as follows:

 
 
Group Term Life
Insurance Premiums

 
Contributions to
401(k) Plan

Name

 
2004
 
2003
 
2002
 
2004
 
2003
 
2002

Jeffrey B. Swartz
 
$
2,106
 
$
714
 
$
1,482
 
$
6,500
 
$
6,000
 
$
6,000

Kenneth P. Pucker
 
 
1,403
 
 
474
 
 
971
 
 
5,988
 
 
6,000
 
 
5,885

Brian P. McKeon
 
 
1,102
 
 
383
 
 
762
 
 
5,737
 
 
6,000
 
 
5,578

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Gary S. Smith
 
 
988
 
 
342
 
 
741
 
 
2,511
 
 
3,205
 
 
2,175

Michael J. Harrison
 
 
985
 
 
116
 
 

 
 
4,335
 
 

 
 

(4)
Mr. McKeon
was the Company’s Senior Vice President—Finance and Administration until May 2002.

(5)
Mr. Smith
joined the Company in February 2002.

(6)
Mr. Harrison
joined the Company in October 2003.

(7)
The
Management Development and Compensation Committee (“MDCC”), as well as the Board in the case of the Chief Executive Officer, approved in March 2005 awards of shares of
restricted stock to Messrs. Swartz, McKeon, Smith and Harrison with the equivalent dollar value of $4,594,140, $1,316,987, $980,083, and $1,316,987, respectively, for achievement of performance
objectives for 2004 under the 2004 Executive Long-Term Incentive Program. The actual number of shares of restricted stock will be determined and paid out to these executives on
July 5, 2005 by dividing the dollar amount awarded to each by the closing market price of the Company’s Class A Common Stock on such date. The MDCC also approved in March 2005 an
award of 100,000 shares of restricted stock to Mr. Pucker for achievement of a performance objective for 2004 under the 2004 Long-Term Incentive Program for Kenneth P. Pucker that
will also be paid out on July 5, 2005. For purposes of reporting a value for Mr. Pucker’s award in this column, the value is based on the closing market price of the Company’s
Class A Common Stock on March 2, 2005, the award approval date. All of these awards of restricted stock will be subject to vesting periods. See additional information below under the
“Long-Term Incentive Plans—2004 Award” heading.

Option Grants in Last Fiscal Year

        The following table sets forth information regarding grants of stock options to the Named Executive Officers during the fiscal year ended December 31,
2004.

Individual Grants
 
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
for Option Term(1)

Name
(a)

 
Number of
Securities
Underlying
Options
Granted
(#)
(b)

 
Percent of
Total
Options
Granted to
Employees
in Fiscal
Year
(%)
(c)

 
Exercise
or Base
Price
($/Sh)(2)
(d)

 
Expiration
Date
(e)

 
5%
($)
(f)

 
10%
($)
(g)

Jeffrey B. Swartz
 
75,000
 
10.7
 
62.58
 
3/3/14
 
2,951,717
 
7,480,230

Kenneth P. Pucker
 
45,000
 
6.4
 
62.58
 
3/3/14
 
1,771,030
 
4,488,138

Brian P. McKeon
 
35,000
 
5.0
 
62.58
 
3/3/14
 
1,377,468
 
3,490,774

Gary S. Smith
 
20,000
 
2.8
 
62.58
 
3/3/14
 
787,125
 
1,994,728

Michael J. Harrison
 
13,000
 
1.8
 
62.58
 
3/3/14
 
511,631
 
1,296,573

(1)
Based
on the exercise price on the date of grant and annual appreciation of such price through the expiration date of such options at an annualized rate of 5% and 10%. The actual
value, if any, that an optionee may realize upon exercise will depend on the excess of the market price for the Class A Common Stock over the option exercise price on the date the option is
exercised. There is no assurance that the actual value realized by an optionee upon the exercise of an option will be at or near the value estimated above.

11

(2)
All
stock options granted in 2004 to the Named Executive Officers have an exercise price equal to the fair market value on the date of grant and are exercisable at the rate of 25% of
the total underlying shares on each of the first four anniversaries of the date of grant.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

        The following table sets forth information for each of the Named Executive Officers as to the total number of exercised and unexercised stock options held at
December 31, 2004 and the value of unexercised “in-the-money” stock options held at December 31, 2004.

Name
(a)

 
Shares
Acquired
on
Exercise
(#)
(b)

 
Value
Realized
($)
(c)

 
Number of Securities
Underlying
Unexercised Options
at Fiscal Year-End
Exercisable/Unexercisable
(#)
(d)

 
Value of Unexercised
“In-the-Money” Options
at Fiscal Year-End(1)
Exercisable/Unexercisable
($)
(e)

Jeffrey B. Swartz
 
523,500
 
21,957,266
 
185,300/207,500
 
4,854,476/3,051,050

Kenneth P. Pucker
 
67,750
 
2,114,393
 
30,000/145,000
 
170,100/2,324,625

Brian P. McKeon
 
97,500
 
2,968,063
 
30,000/97,500
 
440,550/1,437,875

Gary S. Smith
 

 

 
33,750/61,250
 
904,575/1,084,125

Michael J. Harrison
 

 

 
15,000/58,000
 
175,200/526,770

(1)
Stock
options are “in-the-money” if the fair market value of the Class A Common Stock exceeds the exercise price of the stock option. The amounts shown
in column (e) represent the difference between the closing price of the Company’s Class A Common Stock on December 31, 2004 ($62.67) and the exercise price of those options which
are “in-the-money” on that date, multiplied by the applicable number of underlying securities.

Long-Term Incentive Plans—2004 Award

        The following table provides information about target awards made to each of the Named Executive Officers during 2004 under two long-term incentive
programs, effective January 1, 2004. Each of the plans contains pre-established performance objectives corresponding to a performance period.

12


The
final payment value, if any, of the target awards will be determined based on Company performance that meets or exceeds the performance objectives for the stated performance periods.

 
 
 
 
 
 
Estimated Future Payouts Under Non-Stock
Price-Based Plans

 
 
Number of
Shares,
Units or
Other Rights
(#)
(b)

 
 
Name
(a)

 
Performance or
Other Period
Until Maturation
or Payout
(c)

 
Threshold
($ or #)
(d)

 
Target
($ or #)
(e)

 
Maximum
($ or #)
(f)

Jeffrey B. Swartz (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
1,875,000
1,940,500
2,008,500
 
3,750,000
3,881,000
4,017,000
 
5,625,000
5,821,500
6,025,500

Kenneth P. Pucker (2),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 



 
100,000 shares

3,000,000
 
100,000 shares

3,000,000

Brian P. McKeon (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
537,500
556,500
576,000
 
1,075,000
1,113,000
1,152,000
 
1,612,500
1,669,500
1,728,000

Gary S. Smith (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
400,000
414,000
428,500
 
800,000
828,000
857,000
 
1,200,000
1,242,000
1,285,500

Michael J. Harrison (1),(3)
 



 
1/1/04–12/31/2004
1/1/04–12/31/2005
1/1/04–12/31/2006
 
537,500
556,500
576,000
 
1,075,000
1,113,000
1,152,000
 
1,612,500
1,669,500
1,728,000

(1)
Awards
established under the 2004 Executive Long-Term Incentive Program (the “2004 LTIP”). The 2004 LTIP was established under the Company’s 1997 Incentive Plan, as amended, and
amounts awarded under the 2004 LTIP are intended to qualify as performance based compensation under Section 162(m) of the Internal Revenue Code. Under the 2004 LTIP, award opportunities for
one, two and three year performance periods commenced on January 1, 2004. Earnings per share and revenue performance measures were established for the one, two and three year performance
periods. These measures contain a threshold, target and maximum performance objective that must be met or exceeded in order to earn a specified level of award associated with attainment of that
objective, as shown above in the table for each performance period. For each performance period, a dollar value was assigned to each level of award for each participating executive officer that will
be increased proportionately to the extent the threshold or target objective is exceeded, but in no event may an award exceed the maximum level of award, as shown above in the table. Upon the grant of
an award, the earned dollar value will be converted to a number of shares of restricted stock of the Company’s Class A Common Stock having an equivalent value. Shares awarded under the 2004 one
year performance period will vest in thirds on the first, second and third anniversaries of the date of grant. Shares awarded under the two and three year performance periods, if any, will vest in
full on the third anniversary of the date of grant.

(2)
Awards
established under the 2004 Long-Term Incentive Program for Kenneth P. Pucker (the “COO 2004 LTIP”). The COO 2004 LTIP was established under the Company’s 1997 Incentive Plan,
as amended, and amounts awarded under the COO 2004 LTIP are intended to qualify as performance based compensation under Section 162(m) of the Internal Revenue Code. Under the COO 2004 LTIP,
award opportunities for one and three year performance periods commenced on January 1, 2004. Earnings per share performance measures were established for the one and three year performance
periods. These measures contain a target performance objective that must be met in order to earn the award associated with the attainment of that objective, as shown above in the table for each
performance period. No awards will be made for performance not meeting the target and no increase will be made to award amounts for performance exceeding the targets. Shares awarded under the 2004 one
year performance period will vest in full on the second anniversary of the date of grant.

(3)
The
Management Development and Compensation Committee of the Board of Directors, which administers both of the 2004 long-term incentive programs described above,
determined that performance measures for the 2004 one year performance period (i) exceeded the target objective under the 2004 LTIP and (ii) met the target objective under the COO 2004
LTIP, and approved the awards to be made to the participating executive officers under the respective programs. These awards are shown in the Summary Compensation Table under the LTIP Payout column,
but the actual grant date for all of these awards will be July 5, 2005. For the awards expressed with a dollar value under the 2004 LTIP, these will be converted to a number of shares of
restricted

13

    stock
    of the Company’s Class A Common Stock having the equivalent value, based on the closing price quoted on the New York Stock Exchange on July 5, 2005.

Equity Compensation Plan Information

Plan Category

 
Number of securities
to be issued
upon exercise of
outstanding
options,
warrants and rights

 
Weighted-average
exercise price of
outstanding options,
warrants and rights

 
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))

 
 
(a)
 
(b)
 
(c)

Equity compensation plans approved by security holders
 
2,990,240
 
$
44.08
 
1,522,412

Equity compensation plans not approved by security holders
 

 
 

 

 
Total
 
2,990,240
 
$
44.08
 
1,522,412

Change of Control Arrangements

        The Company has entered into change of control severance agreements with Jeffrey B. Swartz, Kenneth P. Pucker, Brian P. McKeon, Gary S. Smith and Michael J.
Harrison (“Covered Officers”) pursuant to approval from the Board of Directors. In the event (i) Sidney W. Swartz, Jeffrey B. Swartz, the lineal descendants of Jeffrey B. Swartz, the Sidney W.
Swartz 1982 Family Trust and any other trust or foundation controlled by Sidney W. Swartz and/or Jeffrey B. Swartz (collectively the “Swartz Family”) cease to hold the voting power to elect a majority
of the members of the Board of Directors, or all or substantially all of the Company’s assets are transferred to an unrelated third party, or the Company is liquidated (each a “Change of Control”) and
(ii) the employment of a Covered Officer is terminated within 24 months following a Change of Control other than for cause or due to a change in responsibilities, reduction in
compensation or other benefits, relocation or certain other adverse events,
then the Covered Officer would be entitled to a lump sum payment of two times the sum of (i) the Covered Officer’s annual base salary and (ii) the average of the annual bonuses earned by
the Covered Officer for the previous three full fiscal years, plus 24 months of benefits following the date of termination of employment. In addition, a Covered Officer may terminate his or her
employment voluntarily during the 13th full calendar month following a Change of Control and, under certain conditions, the Company will pay one-half of the amount specified
above and provide 12 months of benefits. In the event of a Change of Control, options become immediately exercisable. Payments or benefits paid pursuant to a Change of Control severance
agreement that are subjected to certain taxes will, under certain circumstances, be reimbursed by the Company.

14

Performance Graph

        The following graph shows the five-year cumulative total return of Class A Common Stock as compared with the Standard & Poor’s 500 Stock
Index and the weighted average of the Standard & Poor’s Footwear Index and the Standard & Poor’s Apparel, Accessories and Luxury Goods Index. The total return for the Company is weighted
in proportion to the percent of the Company’s revenue derived from sales of footwear and from apparel and accessories (excluding royalties on products sold by licensees), respectively, for each year.

 
 
1999(1)
 
2000
 
2001
 
2002
 
2003
 
2004

Timberland
 
100.00
 
252.96
 
140.26
 
134.70
 
196.96
 
237.05

S&P 500 Index
 
100.00
 
90.90
 
80.09
 
62.39
 
80.29
 
89.03

Weighted Average of S&P 500 Footwear Index and S&P 500 Apparel, Accessories and Luxury Goods Index
 
100.00
 
120.58
 
125.45
 
107.27
 
152.14
 
199.27

(1)
Indexed
to December 31, 1999.

15

Management Development and Compensation Committee Report on Executive Compensation

        The Management Development and Compensation Committee (the “Committee”) consists of Ms. Kent, Chair, Ms. Esteves and Mr. Fitzsimmons. The
Committee’s responsibilities are discussed above under the heading “Committees of the Board of Directors and Board of Directors Independence.”

        The
Committee attempts to set annual salary levels for the Company’s executive officers, including the Chief Executive Officer, at the competitive mid-point of the salaries
of executives in comparable positions at similar companies. The Committee attempts to set annual bonuses and long-term incentives at levels that, when combined with annual salaries and
assuming that actual performance meets the challenging performance goals established by the Committee, will approximate the seventy-fifth percentile of the average total compensation of executives in
comparable positions at similar companies. The Committee’s decisions concerning compensation are also made in light of each executive officer’s level of responsibility, performance and other
compensation awards. The Committee uses survey data and other services provided by Company resources and an independent compensation consulting firm. The Committee has engaged an independent
compensation consulting firm to serve exclusively as advisor to the Committee.

        Cash bonuses are payable under the Company’s Short-Term Incentive Plan for Managerial Employees (“STIP”) or pursuant to the Company’s 1997 Incentive
Plan approved by the Company’s stockholders in May 1997 and amended by the stockholders in May 2001 and May 2003, and are generally intended to qualify as performance-based
awards. Pursuant to these plans, the Committee annually reviews management’s financial performance goals for the Company, job performance goals for participants and target bonus awards for such
participants, expressed as a percentage of such participants’ salaries. Annual bonuses are awarded according to a formula based upon the achievement, in whole or in part, of these Company and
individual performance goals.

        STIP
participants who have job responsibilities within the Company’s business units (as opposed to its corporate functions) are also evaluated on the business units’ achievement of some
or all of the following target measurements: revenue, operating contribution, operating ratios, gross margin rate and cash flow. The annual STIP bonuses for higher-level executives are more heavily
influenced by Company performance than are those for lower-level executives. The amount of annual bonus awards under the STIP may exceed 100% of the target bonus awards established if actual Company
performance exceeds targeted goals or, in some cases, as a result of an executive’s individual performance goals.

        In
the case of the Chief Executive Officer, the Committee approved a STIP bonus award for 2004 based entirely on the Company’s achievement of exceeding targets related to earnings per
share, cash flow, and on time line fill which is an operating ratio for measuring service and delivery of product to customers. The target bonus for the Chief Executive Officer was set at 125% of base
salary for target achievement of earnings per share, cash flow, and on time line fill. The STIP design allows for upside bonus opportunity, up to a maximum of two times the target bonus, for Company
performance exceeding target(s). As such, the target bonus may be achieved with varying levels of Company performance against the metrics. For 2004, actual Company performance exceeded targets
established for each metric. The members of the Board of Directors, excluding Sidney Swartz and Jeffrey Swartz, ratified the 2004 bonus award for Jeffrey Swartz.

16


        In 2004, the Committee shifted its strategy for delivering long-term incentive compensation for its higher-level executives from stock options to
restricted stock awards. The Committee believes that pre-established three year long-term incentive compensation plans will drive higher-level executive focus on financial
performance for periods exceeding twelve months in duration and more closely align their interests as holders of restricted stock with the long-term interests of the Company’s
stockholders. The Committee believes that restricted stock awards that are payable under these plans provide higher-level executives with greater incentive than stock options alone to create and
sustain long-term shareholder value.

        To
implement its strategy, the Committee in March 2004 adopted a 2004 Executive Long-Term Incentive Program (which excluded the Chief Operating Officer for whom a separate
long-term incentive program was adopted) which includes one, two and three year performance periods that commenced on January 1, 2004 (the “2004 LTIP”). Under the 2004 LTIP,
earnings per share and revenue performance metrics were established for each of the one, two, and three year performance periods, and eligible higher-level executives will be awarded shares of
restricted stock at the threshold,
target or maximum level based on the associated level of performance achieved with the pre-established metrics for each of the relevant periods. A dollar value was assigned to each level
of award for each participating higher-level executive under the 2004 LTIP which will be increased proportionately to the extent the threshold or target measure of performance is exceeded. Upon the
grant of an award under the 2004 LTIP, the earned dollar value will be converted to a number of shares of restricted stock of the Company’s Class A Common Stock having an equivalent value.
Under the 2004 LTIP, awards of restricted stock for the 2004 one year performance period will vest in thirds on the first, second, and third anniversaries of the date of grant. Awards of restricted
stock for the two and three year performance periods, if any, will vest in full on the third anniversary of the date of grant. More information regarding the 2004 LTIP, and the long-term
incentive program applicable to the Chief Operating Officer is contained in this document under the heading, “Long-Term Incentive Plans—2004 Award.”

        As discussed above, in 2004 the Committee and Board of Directors approved restricted stock award opportunities pursuant to long-term incentive
programs. In March 2005, the Committee approved and members of the Board, excluding Sidney Swartz and Jeffrey Swartz, ratified an award of shares of restricted stock under the 2004 LTIP for the
Chief Executive Officer with an equivalent dollar value of $4,594,140, based entirely on the Company’s achievement of the earnings per share and revenue performance metrics that exceeded target level
of performance for fiscal 2004. The grant of restricted stock to Jeffrey Swartz will be made on July 5, 2005 by converting the dollar value of his award to a number of shares of the Company’s
Class A Common Stock, on a restricted basis, having the equivalent value based on the closing price of the stock on the New York Stock Exchange on July 5, 2005. This award to Jeffrey
Swartz and awards to the other Named Executive Officers are shown as “LTIP Payouts” for 2004 in the Summary Compensation Table contained elsewhere in this document. All of these awards are intended to
qualify as a performance-based award under the 1997 Incentive Plan.

        The Committee believes that stock options are an appropriate means to compensate the Company’s lower-level executives and employees in a manner that encourages
them to identify with the long-term interests of the Company’s stockholders. Stock options are granted on the basis of competitive levels of stock options granted to employees with
comparable positions at similar companies. In 2004, prior to the Committee’s implementation of its new long-term incentive

17

compensation
strategy, Jeffrey Swartz was awarded 75,000 stock options, based on the Committee’s compensation strategy in effect at that time.

        The
Company grants stock options to certain employees at the time of hire and frequently at the time of promotion, based on their levels of responsibility. In addition, the Company may
make stock option grants to certain employees based on their individual performance. Stock options become exercisable at such times as the Committee prescribes. All stock options granted in 2004 have
an exercise price equal to the fair market value on the date of grant and the majority are exercisable at the rate of 25% of the total underlying shares on each of the first four anniversaries of the
date of grant. These stock options expire ten years from the date of grant or when the holder ceases to be an employee, if earlier, unless the employee has at least ten years of service and
voluntarily terminates employment in which case the vested options will remain exercisable for the life of the options.

        Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to a public company for compensation over $1.0 million paid to any
of the Company’s Chief Executive Officer and four other highest paid executive officers. However, eligible performance-based compensation awards are not subject to the deduction limits if certain
requirements are satisfied. The Committee takes the limitations of Section 162(m) into account in determining awards to executive officers and, in appropriate circumstances, may limit awards or
design them to come within the performance-based compensation exception.

 
 
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

 

 

Virginia H. Kent, Chair
Irene M. Esteves
John A. Fitzsimmons

18




SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table presents the number of shares of Class A Common Stock and Class B Common Stock beneficially owned by (i) persons known to
the Company to be beneficial owners of 5% or more of the outstanding shares of either Class A Common Stock or Class B Common Stock, (ii) each director, nominee for director and
Named Executive Officer, and (iii) all directors and executive officers as a group, as of the close of business on March 1, 2005:

 
 
Shares Owned Beneficially

 
 
Class A
 
Class B
Name and Address of Beneficial Owner(1)

 
Number(2)
 
Percent(3)
 
Number
 
Percent(3)

Judith H. Swartz, John E. Beard and Robert N. Shapiro, as Trustees of The Sidney W. Swartz 1982 Family Trust
 
267,433
 
*
 
1,610,306
 
27.4

Sidney W. Swartz
 
394,706
 
1.4
 
4,137,592
 
70.5

Goldman Sachs Asset Management, L.P. (4)
 
1,457,969
 
5.1
 

 

Jeffrey B. Swartz
 
454,727
(5)
1.6
 
123,932
(5)
2.1

Kenneth P. Pucker
 
150,914
 
*
 

 

Brian P. McKeon
 
60,912
 
*
 

 

Gary S. Smith
 
58,545
 
*
 

 

John A. Fitzsimmons
 
43,750
 
*
 

 

John F. Brennan
 
32,293
 
*
 

 

Ian W. Diery
 
28,750
 
*
 

 

Virginia H. Kent
 
28,750
 
*
 

 

Michael J. Harrison
 
18,575
 
*
 

 

John E. Beard
 
13,050
 
*
 

 

Bill Shore
 
11,875
 
*
 

 

Irene M. Esteves
 
2,500
 
*
 

 

Kenneth T. Lombard
 

 
*
 

 

Edward W. Moneypenny
 

 
*
 

 

Peter R. Moore
 

 
*
 

 

Terdema L. Ussery, II
 

 
*
 

 

All directors and executive officers as a group (22 persons)
 
1,444,418
 
5.0
 
5,871,830
 
100

*
Does
not exceed 1% of the class.

(1)
Address,
unless otherwise noted: c/o The Timberland Company, 200 Domain Drive, Stratham, NH 03885.

(2)
Amounts
include shares issuable upon the exercise of stock options which are either currently exercisable or will become exercisable on or before April 30, 2005, as follows:
Mr. Beard, 5,050; Mr. Brennan, 16,250; Mr. Diery, 28,750; Ms. Esteves, 2,500; Mr. Fitzsimmons, 43,750; Mr. Harrison, 18,250; Ms. Kent, 28,750;
Mr. McKeon, 58,750; Mr. Pucker, 87,500; Mr. Shore, 11,875; Mr. Smith, 57,500; Mr. Jeffrey Swartz, 266,550; and all executive officers and directors as a group,
764,262. Amounts also include the unvested shares awarded pursuant to Restricted Stock Awards as follows: in 2003 and 2004 to Mr. Pucker, 16,668 and 35,819 respectively, and in 2002, 2003, and
2004 to Mr. Jeffrey Swartz, 8,334, 20,000, and 57,319 respectively.

(3)
Percentages
are calculated on the basis of the amount of outstanding shares of common stock of such class plus, for each person or group, any shares such person or group has the right
to acquire on or prior to April 30, 2005.

19

(4)
Address:
30 Hudson Street, Jersey City, New Jersey 07302. Beneficial ownership as of December 31, 2004 based on a Schedule 13G dated February 9, 2005.

(5)
Amount
includes 15,600 shares of Class A Common Stock and 91,742 shares of Class B Common Stock held by Mr. Jeffrey Swartz as custodian for minor children, and
43,602 shares of Class A Common Stock held by Mr. Swartz’s spouse.

        Sidney
Swartz, his children and grandchildren beneficially own all of the Class B Common Stock. As of March 1, 2005, Sidney Swartz and The Sidney W. Swartz 1982 Family
Trust, a trust for the benefit of his family (the “Family Trust”), held, in the aggregate, approximately 67.1% of the combined voting power of the Company’s capital stock, and the Family Trust held
less than 1% of the Class A Common Stock. By virtue of this stock ownership, Sidney Swartz may be deemed to be a “control person” of the Company within the meaning of the rules and regulations
under the Securities Act of 1933, as amended, and the Family Trust influences the election of Mr. Diery, Ms. Esteves and Mr. Fitzsimmons. Jeffrey Swartz, the Company’s President
and Chief Executive Officer, is one of the beneficiaries of the Family Trust.




CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        If Sidney Swartz should die while he is an employee of the Company, the Company will pay to his wife for the three years following his death (or, if earlier,
until her death) a monthly amount equal to Mr. Swartz’s monthly salary at the time of his death.

        Jeffrey
Swartz, the Company’s President and Chief Executive Officer, is the son of Sidney Swartz.

        John
E. Beard, a member of the Company’s Board of Directors and formerly the Company’s Secretary, was a partner in the law firm of Ropes & Gray, which provides legal services to
the Company. Mr. Beard became of counsel at Ropes & Gray in January, 2001.

        In
2004, the Company affected a shelf offering of shares of its Class A Common Stock in which members of the Swartz family, trusts for the benefit of certain members of the Swartz
family, and certain charities sold an aggregate of 6,522,441 shares. The Company paid $458,571 in fees and expenses related to this offering, of which $338,055 was reimbursed to the Company by the
selling stockholders.

        The
Company loaned $250,000 in 1999 to Community Wealth Ventures, Inc. (“CWV”) of which Bill Shore, a member of the Company’s Board of Directors, serves as Chairman. The loan
bears interest at 8% per annum and had an initial term of four years which the Company agreed to extend to six years during 2002. As of December 31, 2004, $50,000 of the loan remained
outstanding. In addition, during 2002 the Company entered into a services agreement with CWV under which the Company paid $62,400 to CWV for consulting services to the Company related to developing
programs for employee volunteerism. In 2004, the Company also donated $571,839 in cash and products to Share Our Strength, a not for profit, anti-hunger and anti-poverty
organization. This donation was slightly more than 2% of Share Our Strength’s 2004 gross revenues. Mr. Shore is the founder and President of Share Our Strength. Jeffrey Swartz was appointed to
the Board of Directors of Share Our Strength in 2003.

        The
Company loaned approximately $1.1 million to Kenneth P. Pucker, Chief Operating Officer of the Company, in 2000, an amount equal to the taxes payable as a result of his
election under Section 83(b) of the Internal Revenue Code with respect to his restricted stock award in 1999. On March 1, 2001, the Board of Directors forgave $325,000 of the loan and
reimbursed Mr. Pucker $281,343 for income taxes related to such forgiveness, and authorized the Chief Executive Officer to forgive such additional loan amounts in the future, if any, as he
deems appropriate in his sole discretion. On March 28, 2002, the Company forgave an additional $261,758 of the loan and reimbursed Mr. Pucker $222,083 for income taxes related to such
forgiveness. The Company reimbursed Mr. Pucker for income taxes payable on imputed income associated with this loan, and in

20


2002,
2003 and 2004 the Company reimbursed $32,272, $13,661 and $29,583, respectively. On November 17, 2004, Mr. Pucker paid to the Company $523,517, which was the remaining principal
balance of the loan. The loan had a term of five years and bore interest at the mid-term Applicable Federal Rate.




COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

        The current members of the Management Development and Compensation Committee of the Board of Directors are Ms. Kent, Chair, Ms. Esteves and
Mr. Fitzsimmons. Mr. Beard and Dr. Zaleznik also served on this committee in early 2004. See “Certain Relationships and Related Transactions” above for information concerning
Mr. Beard.




FINANCIAL AND OTHER INFORMATION

        The Company mailed its combined 2004 Annual Report and Form 10-K to its stockholders on or about April 15, 2005. The combined 2004
Annual Report and Form 10-K includes audited financial statements, and other business information and is incorporated herein by reference.

        To
obtain a free copy of the Company’s combined Annual Report and Form 10-K for the fiscal year ended December 31, 2004, which Form 10-K was
filed by the Company with the Securities and Exchange Commission, contact the Investor Relations Department, The Timberland Company, 200 Domain Drive, Stratham, New Hampshire 03885 (telephone:
(603) 773-1212).




SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        The securities laws of the United States require the Company’s directors, its executive officers and any persons holding more than 10% of the Class A
Common Stock to report their ownership of Class A Common Stock and any changes in that ownership to the Securities and Exchange Commission. All such persons satisfied these filing requirements
during and with respect to fiscal year 2004, except that the Company inadvertently failed to file on a timely basis one report on Form 4 for each of John F. Brennan, Irene M. Esteves, Virginia
H. Kent and Jeffrey B. Swartz. With respect to the number of transactions for each Form 4 that was filed late, Mr. Brennan, Ms. Esteves and Ms. Kent each had one
transaction and Mr. Swartz had twenty-six transactions reflecting simultaneous exercise of options and sale of underlying shares. In making this disclosure, the Company has relied
solely on written representations of its directors, its executive officers and persons who previously held more than 10% of the Class A Common Stock furnished to the Company, and copies of the
reports that these persons have filed with the Securities and Exchange Commission.




OTHER BUSINESS

        The Board of Directors knows of no other matters to be presented at the Annual Meeting. If any additional matters should properly come before the Annual Meeting,
the persons appointed as proxies in the enclosed proxy intend to vote such proxy in accordance with their judgment on any such matters.




STOCKHOLDER PROPOSALS

        Proposals which stockholders intend to present at the 2006 Annual Meeting of Stockholders must be received by the Secretary of the Company no later than
February 15, 2006 to be presented at that Annual Meeting. Any proposal received after such date will be untimely and will not be considered at the 2006 Annual Meeting of Stockholders. To be
eligible for inclusion in next year’s Proxy Statement, the Secretary of the Company must receive stockholder proposals no later than December 16, 2005. In addition to these mailing
requirements, stockholder proposals also must be in compliance with applicable Securities and Exchange Commission regulations.

21

PROXY

THE TIMBERLAND COMPANY
ANNUAL MEETING OF STOCKHOLDERS—MAY 19, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

        The undersigned hereby appoints Sidney W. Swartz and Jeffrey B. Swartz, and each of them, as attorneys and proxies, with the power of substitution, to represent
and vote at the Annual Meeting of Stockholders of The Timberland Company (the “Company”) and at any adjournments thereof, all shares of the Company’s Class A Common Stock which the undersigned
could vote if present, in such manner as they, or either of them, may determine on any matters which may properly come before the meeting or any adjournments thereof and to vote on the matters set
forth on the reverse side of this proxy as directed by the undersigned. The Annual Meeting will be held on Thursday, May 19, 2005, at 9:00 a.m., at The Colonnade Hotel,
120 Huntington Avenue, Boston, Massachusetts 02116.

        A
stockholder is entitled to one vote for each share of Class A Common Stock and ten votes for each share of Class B Common Stock held of record at the close of business on
March 24, 2005. The holders of Class A Common Stock will vote separately as a class to elect three nominees for director, Ian W. Diery, Irene M. Esteves and John A. Fitzsimmons, and the
holders of Class A Common Stock and the holders of Class B Common Stock will vote together as a single class to elect eight nominees for director, Sidney W. Swartz, Jeffrey B. Swartz,
Virginia H. Kent, Kenneth T. Lombard, Edward W. Moneypenny, Peter R. Moore, Bill Shore and Terdema L. Ussery, II.

        THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED TO FIX THE NUMBER OF DIRECTORS AT ELEVEN, AND TO ELECT
ALL ELEVEN NOMINEES. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER BUSINESS NOT KNOWN AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.

SEE REVERSE
SIDE
 
CONTINUED AND TO BE SIGNED
ON REVERSE SIDE
 
SEE REVERSE
SIDE

ý
Please mark votes as
in this example.

THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.

1.
 
To fix the number of directors at eleven for the coming year, subject to further action by the Board of Directors as provided in the Company’s By-Laws, and to elect the following nominees:

 

 

NOMINEES:

 

(01) Sidney W. Swartz, (02) Jeffrey B. Swartz, (03) Ian W. Diery, (04) Irene M. Esteves, (05) John A. Fitzsimmons, (06) Virginia H. Kent, (07) Kenneth T. Lombard, (08)
 Edward W. Moneypenny, (09) Peter R. Moore, (10) Bill Shore, and (11) Terdema L. Ussery, II

FOR ALL
NOMINEES

 

WITHHELD FROM
ALL NOMINEES

o

 

o

o

 

 

 

 

For all nominees except as noted above

 

 

 

 

 

MARK BOX AT RIGHT IF YOU PLAN TO ATTEND THE ANNUAL MEETING. o

MARK BOX AT RIGHT IF AN ADDRESS CHANGE OR COMMENT HAS BEEN NOTED ON THIS
CARD. o

Please sign here personally, exactly as your name is printed on your stock certificate. If the stock certificate is registered in more than one name, each joint
owner or each fiduciary should sign personally. Only authorized officers should sign for a corporation.

 

 

 

 

 

 

 

Signature:

 

 

 

Date:

 

 

 

 

 

 

 

Signature:

 

 

 

Date:

 

 

 

 

 

 

 

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