DEF 14A: Definitive proxy statements
Published on
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DECKERS OUTDOOR CORPORATION
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DECKERS OUTDOOR CORPORATION
April 6, 2001
Dear Stockholder:
We cordially invite you to attend our 2001 Annual Meeting of Stockholders
to be held at 5:00 p.m. on Wednesday, May 23, 2001 at Deckers Outdoor
Corporation, 495-A South Fairview Avenue, Goleta, California 93117. Enclosed are
the Notice of Annual Meeting, Proxy Statement and a Proxy Card relating to the
Annual Meeting which we urge you to read carefully. Also enclosed is the
Company's 2000 Annual Report to Stockholders on Form 10-K. Whether or not you
expect to attend the Annual Meeting, please sign and date the enclosed Proxy
Card and return it as promptly as possible to ensure that your shares will be
voted. Properly executed Proxy Cards received by the Company prior to the Annual
Meeting will be voted in accordance with the instructions indicated in such
cards. Because mail delays occur frequently, it is important that the enclosed
Proxy Card be returned well in advance of the meeting.
ON BEHALF OF YOUR
BOARD OF DIRECTORS
DOUGLAS B. OTTO
Chairman of the Board and
Chief Executive Officer
DECKERS OUTDOOR CORPORATION
495-A SOUTH FAIRVIEW AVENUE, GOLETA, CALIFORNIA 93117
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2001
TO THE STOCKHOLDERS OF
DECKERS OUTDOOR CORPORATION
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Deckers Outdoor Corporation, a Delaware corporation (the
"Company"), will be held at Deckers Outdoor Corporation, 495-A South Fairview
Avenue, Goleta, California 93117, on Wednesday, May 23, 2001, beginning at 5:00
p.m., local time. The Annual Meeting will be held for the following purposes:
1. To elect one (1) director of the Company to serve as a Class II
director until the Annual Meeting of Stockholders to be held in 2004.
2. To approve an amendment to the Company's 1993 Employee Stock
Incentive Plan (the "1993 Plan") to (a) increase the number of shares of
Common Stock reserved for issuance thereunder by 1,000,000 shares to an
aggregate of 3,000,000 shares, of which 2,800,000 may be issued pursuant to
incentive stock options and (b) extend the duration of the 1993 Plan for an
additional three years.
3. To ratify the selection of KPMG LLP as the Company's independent
auditors.
4. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
The Board of Directors has fixed March 26, 2001 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any postponements or adjournments thereof, and only stockholders of
record at the close of business on that date are entitled to such notice and to
vote at the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the offices of the Company for ten (10) days prior to the Annual
Meeting.
We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the Annual
Meeting either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN
ONE PROXY CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
BY ORDER OF THE BOARD OF DIRECTORS
DOUGLAS B. OTTO
Chairman of the Board and
Chief Executive Officer
Goleta, California
April 6, 2001
DECKERS OUTDOOR CORPORATION
495-A SOUTH FAIRVIEW AVENUE
GOLETA, CALIFORNIA 93117
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2001
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Deckers Outdoor Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 5:00 p.m., local time, on May 23, 2001, at
Deckers Outdoor Corporation, 495-A South Fairview Avenue, Goleta, California
93117, and any postponements or adjournments thereof for the purposes set forth
in the accompanying Notice of Annual Meeting. This Proxy Statement and the
accompanying Form of Proxy were first mailed to stockholders on or about April
6, 2001.
RECORD DATE AND VOTING
March 26, 2001 has been fixed as the record date (the "Record Date") for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting, and any postponements or adjournments thereof. As of March 26,
2001, there were outstanding 9,172,677 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"). No shares of the Company's preferred
stock, par value $.01 per share, were outstanding as of that date. A majority of
the shares of Common Stock entitled to vote, present in person or represented by
proxy, will constitute a quorum at the meeting.
Each share of Common Stock issued and outstanding on the Record Date is
entitled to one vote on any matter presented for consideration and action by the
stockholders at the Annual Meeting. With respect to all matters, other than the
election of the directors, including the approval of the proposal to amend the
1993 Plan, the affirmative vote of a majority of shares of the Company's Common
Stock present in person or represented by proxy at the meeting and entitled to
vote on the subject matter will be the act of the stockholders. Directors will
be elected by a plurality of the votes of the shares of the Company's Common
Stock present in person or represented by proxy and entitled to vote on the
election of directors. Abstentions will be treated as the equivalent of a
negative vote for the purpose of determining whether a director has been
elected. Unless otherwise instructed, proxies solicited by the Company will be
voted "FOR" the nominee named herein for election as director, "FOR" the
proposal to increase the number of shares of Common Stock reserved for issuance
pursuant to the 1993 Plan and to extend the duration of the 1993 Plan, "FOR" the
ratification of the selection of KPMG LLP as the Company's independent auditors,
and in their discretion upon such other business as may properly come before
such meeting or any and all postponements or adjournments thereof.
With respect to brokers who are members of the New York Stock Exchange, the
New York Stock Exchange Rules ("NYSE Rules") generally require that when shares
are registered in street or nominee name, its member brokers must receive
specific instructions from the beneficial owners in order to vote on certain
proposals. However, the NYSE Rules do not require specific instructions in order
for a broker to vote on the election of the Class II director, the amendment of
the Plan and on ratification of the selection of the Company's independent
auditors. If a member broker indicates on the proxy that such broker does not
have discretionary authority as to certain shares to vote on any proposal that
does require specific instructions, those shares will not be considered as
present and entitled to vote with respect to that matter. Pursuant to Delaware
law, a broker non-vote will not be treated as present or voting in person or by
proxy on the proposal.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by giving written notice of revocation to the Secretary of the
Company, by executing a subsequent proxy, or by attending the Annual Meeting and
voting in person. Subject to any such revocation, all shares represented by
properly executed proxies will be voted in accordance with the specifications on
the enclosed proxy card.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's By-Laws state that the Board of Directors shall consist of
not less than one nor more than seven members. The specific number of Board
members within this range is established by the Board of Directors and is
currently set at six. The Company's Certificate of Incorporation provides that
the Board shall be classified into three classes of directors, which classes
serve staggered three-year terms. The Board currently consists of one Class I
director, two Class II directors and two Class III directors. There is currently
one vacancy in the Class I directors. The current term of the Class I director
expires at the Annual Meeting of Stockholders to be held in 2003, the current
term of each Class II director expires at the May 23, 2001 Annual Meeting of
Stockholders, and the current term of each Class III director expires at the
Annual Meeting of Stockholders to be held in 2002. The Board of Directors is
proposing Rex A. Licklider, who is now serving as a Class II director, for
re-election as a Class II director at the Annual Meeting. The term for the
directorship of Karl F. Lopker, a current Class II director, expires on May 23,
2001. Mr. Lopker has decided not to run for re-election as a Class II director
in order to focus on his other interests. The Class II director elected at the
Annual Meeting will serve until the Annual Meeting of Stockholders to be held in
2004, until such director's successor has been duly elected and qualified or
until such director has otherwise ceased to serve as a director. To the
Company's knowledge, the nominee is and will be available to serve. The nominee
has supplied the following background information to the Company:
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE
"FOR" THE ELECTION OF THE ABOVE NOMINEE.
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MANAGEMENT
The directors and executive officers of the Company are set forth below.
The following table includes information with respect to each director and
executive officer of the Company.
Douglas B. Otto, co-founder of the Company in 1973, has served as an
executive officer since that time and as Chairman of the Board and Chief
Executive Officer since 1982. He has also served as President from March 1999
through February 2000 and from 1982 through May 1998, and served as Chief
Financial Officer from June 1990 through December 1992.
Peter C. Benjamin joined the Company in July 1997 to direct the Company's
distribution efforts throughout Japan. He has been President since March 2000,
Chief Operating Officer since March 1999, and served as a Vice President from
March 1999 through March 2000. Mr. Benjamin has been President since 1993 of
Pacific Resources Holding, Inc., an agency for the Japanese outdoor market.
Previously, he was Chief Operating Officer for The North Face, Inc. from March
1992 to March 1993 and was a Vice President of Odyssey USA, Inc., from January
1991 to March 1992.
M. Scott Ash has been Chief Financial Officer since January 1997, Assistant
Secretary since December 1999 and was Secretary from March 1999 to December
1999. Prior to such time, Mr. Ash served as Controller of the Company, beginning
in January 1993. Prior to joining the Company, he was employed by Dole Food
Company, Inc. from August 1992 to January 1993 as Manager of Corporate
Reporting. Previously, he was a Senior Manager at KPMG LLP where he was employed
from September 1986 to August 1992. Mr. Ash is a Certified Public Accountant.
Patrick C. Devaney has been the Company's Senior Vice President since March
2000 and served as Vice President -- Global Sourcing, Production and Development
since November 1997. Prior to joining the Company, Mr. Devaney was employed by
Mizuno USA where he was Director of Global Footwear from February 1990 to June
1997 and was a Global Product/Marketing Manager for Reebok International from
1985 to December 1989.
Joseph E. Nida has been Secretary of the Company since December 1999. Mr.
Nida has been Chairman of the law firm of Nida & Maloney, LLP, the Company's
outside general counsel, since its formation in 1994. Mr. Nida also acts as
Corporate Secretary for two other NASDAQ-NMS companies, QAD Inc. and Miravant
Medical Technologies. He is also a founder and secretary of Santa Barbara
Technology Group, a technology incubator company.
Gene E. Burleson has been a Director of the Company since September 1993.
Mr. Burleson is currently Chairman of Mariner Post-Acute Network, Inc. and a
Director of Alterra Healthcare Corporation and THCG, Inc. From February 1997 to
August 1997, Mr. Burleson was Chief Executive Officer and a Director of Vitalink
Pharmacy Services, Inc., a provider of pharmacy services to nursing facilities.
From October 1989 to February 1997, Mr. Burleson was employed by GranCare, Inc.,
a provider of routine and specialty medical care and rehabilitative services,
where he served as Chief Executive Officer and Chairman of the Board.
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Rex A. Licklider has been a Director of the Company since September 1993.
From 1975 until February 1992, Mr. Licklider served as Chairman of the Board and
Chief Executive Officer of Com Systems, Inc., a long distance telecommunications
company. From February 1992 to January 1993, Mr. Licklider was Chairman of the
Board of Resurgens Communications Group, with whom Com Systems, Inc. had merged.
He has been Co-CEO of The Sports Club Company since February 2000 and Vice
Chairman since 1994. Mr. Licklider is a founder and Partner of Pentium
Investments, Inc. and a Director of The Sports Club Company.
Karl F. Lopker has been a Director of the Company since May 1995 and was
originally a co-founder of the Company in 1973. Since 1979, Mr. Lopker has been
Chief Executive Officer and a Director of QAD Inc., a developer and marketer of
computer software.
John M. Gibbons has been a Director of the Company since July 2000. Since
June 2000, Mr. Gibbons has been President and Vice Chairman of TMC
Communications, Inc., a long distance, data and internet services provider and
since March 2000 has been Vice Chairman of Assisted Living Concepts, Inc., a
national provider of assisted living services. Previously, Mr. Gibbons was
employed by The Sports Club Company, a developer and operator of health and
fitness clubs, where he was Chief Executive Officer and a member of the board of
directors from June 1999 to February 2000 and was President and Chief Operating
Officer from June 1995 to June 1999.
For information concerning beneficial ownership of Common Stock by
directors and executive officers, see "Security Ownership of Certain Beneficial
Owners and Management" below.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
Audit Committee -- The Board has a standing Audit Committee that reviews
the audit and control functions of the Company, the Company's accounting
principles, policies and practices and financial reporting, the scope of the
audit conducted by the Company's auditors, the fees and all non-audit services
of the independent auditors and the independent auditors' opinion and letter of
comment to management and management's response thereto. The committee met six
times during 2000. At the date of this Proxy Statement. Mr. Licklider was
Chairman of the Audit Committee and the committee was comprised of Messrs.
Burleson, Licklider, Lopker, and Gibbons.
Compensation Committee -- The Board has a Compensation Committee (the
"Compensation Committee") that reviews and recommends to the Board the salaries,
bonuses and prerequisites of the Company's executive officers. The Compensation
Committee also reviews and recommends to the Board any new compensation or
retirement plans and administers the Company's 1993 Plan and the Company's 1995
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The committee met four
times during 2000. At the date of this Proxy Statement, Mr. Burleson was
Chairman of the Compensation Committee and the committee was comprised of
Messrs. Burleson, Licklider, Lopker, and Gibbons.
DIRECTOR ATTENDANCE
In 2000, the Company held four meetings of the Board of Directors. During
2000, or since the date they became members of the Board of Directors and its
committees, all of the directors attended at least 75% of the aggregate of the
meetings of the Board and of the committees of which they were members, except
that Mr. Licklider attended 71% of the aggregate of the meetings.
DIRECTOR COMPENSATION
Standard Compensation -- Directors who are not employees of the Company or
its subsidiaries ("Nonemployee Directors") receive an annual retainer to be paid
as follows: $11,000 in cash, or, at the option of a Nonemployee Director,
exercised ten days prior to the start of each year, in Common Stock of the
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Company at a 20% discount off the price of the shares at the closing price at
the beginning of the year; and 2,000 shares of the Common Stock of the Company
per year. On January 1, 1999 and every three years thereafter, the Board sets
the number of shares for the following three years. For 1999 through 2001, the
Board reaffirmed the terms above, except that the annual 2,000 shares awards per
year for both 1999 and 2000 were issued and fully vested effective January 1,
1999. Additionally, Nonemployee Directors receive $1,500 for each meeting of the
Board and $1,000 for each separately scheduled committee meeting that they
attend plus reimbursement of any expenses they may incur with respect to such
meetings. Committee Chairmen receive additional annual retainer fees of $4,000.
Directors who are employees of the Company or its subsidiaries serve as
directors without compensation.
Stock Options -- Nonemployee Directors receive additional compensation in
the form of stock options granted automatically under the 1993 Plan. Upon their
initial election to the Board of Directors, Nonemployee Directors automatically
receive options to purchase 10,000 shares of Common Stock. Such options vest in
annual one-third installments, with the first such installment vesting on the
first anniversary of the date of grant of such option. In addition, beginning on
the fourth annual meeting of stockholders after a Nonemployee Director is first
elected, such Nonemployee Director will automatically be granted each year
options to purchase 2,000 shares of Common Stock. Such additional options will
be fully vested and exercisable at the time of grant. All options granted to
Nonemployee Directors have an exercise price equal to the fair market value of
the shares on the date they are granted.
In February 2000, an independent committee of the Board of Directors,
consisting solely of Mr. Otto, granted to each of the three Non-employee
Directors at that date an additional option to purchase 20,000 shares of Common
Stock. These options have an exercise price equal to the fair market value of
the shares on the date of grant and vest over a three year period.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the years ended December 31, 2000, 1999
and 1998, the reportable compensation paid or awarded to the Chief Executive
Officer and to each of the four other most highly compensated executive officers
of the Company who were executive officers of the Company at December 31, 2000
and received compensation in excess of $100,000 in such year (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
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(1) In 1997, the Company entered into a split-dollar life insurance agreement
with a trust established by Douglas B. Otto, pursuant to which the Company
and the trust will share in the premium costs of life insurance policies
that pay cumulative death benefits upon the death of Mr. Otto. The portion
of the premium equal to the value of the economic benefit is paid by the
trust, with the Company paying the remainder of the premiums. The amounts
above, $109,000 in 2000, $113,000 in 1999 and $116,000 in 1998, reflect the
present value of the economic benefit to Mr. Otto of the portion of the
premium paid by the Company in 2000, 1999 and 1998, respectively. Upon
surrender of the policy or payment of the death benefits thereunder, the
Company is entitled to repayment of an amount equal to the cumulative
payments previously paid by the Company.
(2) In connection with Mr. Benjamin's acceptance of the Chief Operating Officer
position in March 1999, the Company reimbursed him for $13,000 of relocation
costs in 1999.
(3) In connection with Mr. Devaney's acceptance of employment, the Company
reimbursed him for $8,000 of relocation costs in 1998.
(4) In January 2001, Mr. Derclaye resigned from his positions as Executive Vice
President, Vice President -- Brand Development and Managing
Director -- European Operations.
(5) Mr. Benjamin became an executive officer of the Company in 1999.
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The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock granted in 2000 to the Named
Executive Officers.
STOCK OPTION GRANTS IN 2000
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(1) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
The following table sets forth, for the Named Executive Officers,
information with respect to options exercised, unexercised options and year-end
option values, in each case with respect to options to purchase shares of the
Company's Common Stock.
AGGREGATED OPTION EXERCISES IN 2000 AND
2000 YEAR-END OPTION VALUES
EMPLOYMENT AGREEMENTS
Effective January 1992, Douglas B. Otto entered into a five-year employment
agreement with the Company, which was subsequently extended through 2001. For
2001, Mr. Otto's compensation includes a base salary of $345,000, a target bonus
of $175,000 and a maximum bonus of $525,000, based upon the achievement of
certain performance criteria. In the event Mr. Otto's employment agreement is
terminated for any reason, including "For Cause" as defined therein, Mr. Otto
will receive an annual payment of $260,000 and his existing employee benefits
for five years from the date of termination. After any termination of
employment, Mr. Otto may not compete with the Company for one year in the United
States (except in Montana and Wyoming). The Company may not terminate his
employment agreement except "For Cause."
In March 1999, Peter C. Benjamin entered into an employment agreement with
the Company through December 31, 2000, which was subsequently extended through
2002. The agreement provides for a base salary of $260,000 in 2001 and $283,000
in 2002. The agreement also provides for a target bonus of $135,000 and a
maximum bonus of $405,000 in 2001 and a target bonus of $142,000 and a maximum
bonus of $426,000 in 2002, all based upon the achievement of certain performance
criteria. In the event that termination of employment occurs for reasons other
than: (1) cause, or (2) voluntary termination, he will receive nine months'
severance plus committed incentives. In the event that there is a change of
control and
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termination, or constructive termination, Mr. Benjamin will receive eighteen
months of severance, including earned bonuses, plus the acceleration of vesting
of all stock options.
The other officers of the Company do not have employment agreements with
the Company and serve at the pleasure of the Board.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors,
consisting entirely of directors who have never served as officers or employees
of the Company or any of its subsidiaries, except for Mr. Lopker who was
formerly the President of the Company from 1976 to 1982, determines and
administers the compensation of the Company's executive officers. Set forth
below are the principal factors underlying the Committee's philosophy used in
setting compensation.
Compensation Philosophy -- At the direction of the Board of Directors, the
Committee endeavors to ensure that the compensation programs for executive
officers of the Company and its subsidiaries are competitive and consistent in
order to attract and retain key executives critical to the Company's long-term
success. The Committee believes that the Company's overall financial performance
should be an important factor in the total compensation of executive officers.
At the executive officer level, the Committee has a policy that a significant
proportion of potential total compensation should consist of variable,
performance-based components, such as stock options, stock awards and bonuses,
which can increase or decrease to reflect changes in corporate and individual
performance. These incentive compensation programs are intended to reinforce
management's commitment to enhancement of profitability and stockholder value.
The Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation for the chief executive officer and other executive
officers. The Committee considers such corporate performance measures as net
sales, net income, earnings per share and similar quantitative measures. The
Committee also appreciates the importance of achievements that may be difficult
to quantify, and accordingly recognizes qualitative factors, such as successful
supervision of major corporate projects, demonstrated leadership ability and
contributions to industry and community development. For 2000, the most
important qualitative factors in determining incentive compensation awards to
executive officers were the Committee's assessments of their contributions to
the Company's stockholder value, sales, net earnings per share, and improvements
and efficiencies in operations.
The Committee also evaluates the total compensation of the Company's chief
executive officer and other executive officers in light of information regarding
the compensation practices and corporate financial performance of similar
companies in the Company's industry. However, the Committee does not target a
specific percentile range within the peer group compensation structure in
determining compensation for executive officers. From time to time, the
Committee also receives assessments and advice regarding the Company's
compensation practices from independent compensation consultants.
Relationship of Performance to Compensation -- Compensation that may be
earned by the executive officers in any fiscal year consists of base salary,
cash bonus and stock options. Salaries are reviewed periodically and adjusted as
warranted to reflect sustained individual performance. The Committee focuses
primarily on total annual compensation, including incentive awards and cash
bonuses, rather than base salary alone, as the appropriate measure of executive
officer performance and contribution.
The executive officers receive incentive compensation awards based on
individual goals and milestones established for each officer at the beginning of
each year and other factors as determined by the Committee. Such officers
receive compensation for the subsequent attainment of these goals.
The 1993 Plan authorizes the Committee to make grants and awards of stock
options, stock appreciation rights, restricted stock and other stock-based
awards. The Committee grants stock options to executive officers, as well as
other employees and consultants of the Company and its subsidiaries below the
executive
8
officer level. Executive officers are eligible to receive stock option grants,
which the Committee approves from time to time as it deems appropriate.
In approving grants and awards under the 1993 Plan, the quantitative and
qualitative factors and industry comparisons outlined above will be considered.
The number of options previously awarded to and held by executive officers is
reviewed but is not an important factor in determining the size of current
option grants.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various payments and
benefits. Some types of compensation payments and their deductibility (e.g., the
spread of exercise of non-qualified options) depend upon the timing of an
executive's vesting or exercise of previously granted rights. Further,
interpretations of and changes in the tax laws and other factors beyond the
Committee's control also affect the deductibility of compensation.
Chief Executive Officer Compensation -- Douglas B. Otto entered into a five
year employment agreement, effective January 1992, and subsequently extended
through 2001. For 2000, his employment agreement provides for an annual salary
of $275,000 and a maximum possible bonus of $500,000, of which $320,000 was
ultimately earned. For 2001, the base salary of Mr. Otto is $345,000, the target
bonus was set at $175,000 and the maximum available bonus was set at $525,000,
based on an assessment and recommendation performed by an independent
compensation consultant. The amounts of Mr. Otto's bonuses are determined by the
Compensation Committee and are based upon a combination of factors including the
sales and operating results of the Company.
For 2000, the Committee based the majority of Mr. Otto's bonus on several
criteria established at the beginning of the year including the Company's stock
price in relation to that of its Peer Group and the Company's ability to achieve
targeted goals for sales, earnings per share and open orders. In 2000, the
Company experienced an increase in its stock price of 100%, achieved record
sales and increased its earnings per share by 131%. Mr. Otto's 2000 bonus was
therefore based upon the Company's ability to achieve these results together
with a general assessment by the Committee of his contributions to the Company.
Mr. Otto was not granted any stock options during fiscal year 2000, although the
Committee may grant options to him in the future.
In December 2000, the Committee established the compensation of the
Company's Chief Executive Officer and its other executive officers for fiscal
year 2001. In each case, the Committee's decision was based upon the principles
and procedures outlined above.
COMPENSATION COMMITTEE
Gene E. Burleson, Chairman
John M. Gibbons
Rex A. Licklider
Karl F. Lopker
The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the date of this Proxy Statement, the members of the Compensation
Committee were Messrs. Burleson, Licklider, Lopker and Gibbons, none of whom was
an officer or employee of the Company or any of its subsidiaries during fiscal
year 2000 or is a former officer or employee of the Company or any of its
subsidiaries, except for Mr. Lopker who was formerly the President of the
Company from 1976 to 1982.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee is currently composed of four directors, each of whom is
independent as defined by the National Association of Securities Dealers'
listing standards. The Audit Committee operates under a written charter approved
by the Board of Directors. A copy of the charter is attached to this Proxy
Statement as Appendix A.
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
In connection with these responsibilities, the Audit Committee met with
management and the independent accountants to review and discuss the December
31, 2000 financial statements. The Audit Committee also discussed with the
independent accountants the matters required by Statement on Auditing Standards
No. 61 (Communication with Audit Committees) which includes, among other items,
information regarding the conduct of the audit of the Company's financial
statements. The Audit Committee also received written disclosures from KPMG LLP
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee discussed with KPMG
LLP that firm's independence from the Company and its management. The Audit
Committee has further considered the compatibility of the services provided by
KPMG LLP with that firm's independence.
Based upon the Audit Committee's review and discussions with management and
independent accountants, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000, to be filed
with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Rex A. Licklider, Chairman
Gene E. Burleson
John M. Gibbons
Karl F. Lopker
AUDIT FEES
For the year ended December 31, 2000, an aggregate of $116,000 was billed
by KPMG LLP for the professional services rendered for the audit of the
Company's financial statements for such fiscal year and the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
during such period.
ALL OTHER FEES
KPMG LLP billed the Company an aggregate of $161,000 for other services
provided to the Company in 2000 consisting primarily of planning and compliance
services for income taxes and customs matters.
10
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Nasdaq Composite Index and a peer group index for
the five-year period commencing December 31, 1995 and ending December 31, 2000.
The data represented below assumes $100 invested in each of the Company's Common
Stock, the Nasdaq Composite Index and the peer group index on December 31, 1995.
The stock performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under either
of such Acts.
COMPARISON OF TOTAL RETURN (ASSUMING DIVIDEND REINVESTMENT)
* Athletic Shoe Composite peer group index consisting of Saucony Inc., K-Swiss,
Nike Inc., Reebok International Ltd., Rocky Shoes & Boots, Inc., The Stride
Rite Corporation, The Timberland Company, Vans Inc., Wolverine World Wide
Inc., Fila Holding SPA, and Kenneth Cole Productions.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following security ownership information is set forth, as of February
28, 2001, with respect to certain persons or groups known to the Company to be
beneficial owners of more than 5% of the Company's outstanding Common Stock and
with respect to each director of the Company, each of the Named Executive
Officers, and all current directors, nominees and executive officers as a group
(nine persons). Other than as set forth below, the Company is not aware of any
other person who may be deemed to be a beneficial owner of more than 5% of the
Company's Common Stock.
- ---------------
(1) The address of each beneficial owner is 495-A South Fairview Avenue, Goleta,
California 93117, unless otherwise noted.
(2) Unless otherwise noted, sole voting and dispositive power are possessed with
respect to all shares of Common Stock owned.
(3) Includes (a) 2,532,750 shares held by the Douglas B. Otto Trust as to which
Mr. Otto has sole voting and investment power, (b) 283,750 shares held as
trustee for the Tiffany Jade Otto Trust, of which Mr. Otto has sole voting
and investment power, (c) 283,750 shares held as trustee for the Ty Dylan
Bard Otto Trust, of which Mr. Otto has sole voting and investment power, (d)
64,200 shares held by the Edgecliff Foundation, a charitable foundation
formed by Mr. Otto, of which Mr. Otto is the Chairman of the Board of
Directors, and (e) 84,000 shares held by Mr. Otto's wife. Mr. Otto disclaims
ownership of the shares held by his wife.
(4) Includes 275,488 shares held by the Licklider Living Trust as to which Mr.
Licklider has joint voting and investment power.
(5) Includes shares under stock options that are presently exercisable or are
exercisable within 60 days for the following: Douglas B. Otto -- 110,000;
Peter C. Benjamin -- 113,500; M. Scott Ash -- 60,500; Jean-Luc
Derclaye -- 56,000; Patrick C. Devaney -- 48,500; Gene E.
Burleson -- 12,667; Rex A. Licklider -- 12,667; Karl F. Lopker -- 10,667;
John M. Gibbons -- 0; and all directors and executive officers as a
group -- 375,601.
(6) This information is based solely on a Schedule 13G filed by Dimensional Fund
Advisors, Inc. on February 2, 2001. The fund's address is 1299 Ocean Ave.,
11th Floor, Santa Monica, California 90401.
(7) Includes (a) 428,473 shares and (b) 100,000 stock options that are presently
exercisable, all of which were issued in connection with the Teva License
Agreement dated June 7, 1999. Mr. Thatcher's address is: P.O. Box 968,
Flagstaff, Arizona 86002.
(8) Includes 216,000 shares held by a foreign corporation as to which Mr.
Derclaye has joint voting and investment power. In January 2001, Mr.
Derclaye resigned from his positions as Executive Vice President, Vice
President-Brand Development and Managing Director -- European Operations.
* Percentage of shares beneficially owned does not exceed 1% of the class so
owned.
12
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own more
than 10% of the Common Stock (collectively "Section 16 Persons") to file initial
reports of ownership (Forms 3) and reports of changes in ownership of Common
Stock (Forms 4 and Forms 5) with the Securities and Exchange Commission as well
as the Company.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations from each Section 16 Person
known to the Company that no other reports were required, during the fiscal year
ended December 31, 2000, all Section 16(a) filing requirements applicable to its
Section 16 Persons were complied with except that Rex Licklider filed a Form 4
on October 31, 2000 which was due on September 10, 2000, reporting the purchase
of 32,792 shares of Common Stock.
13
PROPOSAL NO. 2
ADDITIONAL 1,000,000 SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
UNDER THE 1993 PLAN AND EXTENSION OF THE DURATION OF THE 1993 PLAN
FOR AN ADDITIONAL THREE YEARS
The 1993 Plan was adopted in August 1993 and amended in May 1994 and May
1998. The 1993 Plan is administered by the Compensation Committee, except that
grants to Nonemployee Directors are automatically made pursuant to a
pre-determined formula. The Compensation Committee consists solely of
Nonemployee Directors. The Compensation Committee has broad authority in
administering and interpreting the 1993 Plan.
The purpose of the 1993 Plan is to enable the Company to attract, retain
and motivate employees by providing for or increasing their proprietary
interests in the Company and, in the case of Nonemployee Directors, to attract
such directors and further align their interests with those of the Company's
stockholders by providing for or increasing their proprietary interests in the
Company. Under the 1993 Plan, officers, directors, employees, independent sales
representatives and outside consultants of the Company are eligible to receive
options to purchase Common Stock. As of the date of this Proxy Statement,
approximately 131 employees and 39 independent sales representatives were
eligible. The par value of the Company's Common Stock is $.01 per share, and the
closing price of the Common Stock on the NASDAQ National Market System on March
26, 2001 was $3.91 per share. Under the current provisions of the 1993 Plan no
Award may be made after August 2003, and no shares of Common Stock of the
Company may be issued upon exercise of any Award after August 2013.
The aggregate number of shares which may be issued pursuant to the grant of
Awards under the 1993 Plan is currently 2,000,000, subject to adjustment for
certain circumstances such as a stock exchange, reorganization,
recapitalization, stock split, reverse stock split, stock dividend or other
capital change or adjustment. At the Annual Meeting, the stockholders are being
requested to consider and approve the proposed amendment to the 1993 Plan to (a)
increase the number of shares reserved for issuance thereunder by 1,000,000
shares to an aggregate of 3,000,000 shares, of which 2,800,000 may be issued
pursuant to incentive stock options and (b) extend the duration of the 1993 Plan
for an additional three years. The Board of Directors approved this amendment,
subject to stockholder approval, in February 2001.
AWARDS TO EMPLOYEES
The 1993 Plan authorizes the Committee to enter into any type of
arrangement with an eligible employee that, by its terms, involves or might
involve the issuance of Common Stock or any other security or benefit with a
value derived from the value of Common Stock. Awards to employees are not
restricted to any specified form or structure and may include, without
limitation, sales or bonuses of stock, restricted stock, stock options, reload
stock options, stock purchase warrants, other rights to acquire stock,
securities convertible into or redeemable for stock, stock appreciation rights,
phantom stock, dividend equivalents, performance units or performance shares
(collectively, "Awards"). An Award to an employee may consist of one such
security or benefit or two or more of them in tandem or in the alternative.
Options granted under the 1993 Plan may be options intended to qualify as
incentive stock options (the "Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options not intended
to so qualify (the "Non-Qualified Stock Options").
An Award to an employee may permit the employee to pay all or part of the
purchase price of the shares or other property issuable pursuant thereto, and/or
to pay all or part of such employee's tax withholding obligation with respect to
such issuance, by (i) delivering previously owned shares of capital stock of the
Company or other property or (ii) reducing the amount of shares or other
property otherwise issuable pursuant to the award. If an option granted to an
employee permitted the employee to pay for the shares issuable pursuant thereto
with previously owned shares, the employee would be able to exercise the option
in successive transactions, known as pyramiding, to acquire a large number of
shares with no more investment than the original share or shares delivered upon
exercise of the option. The exercise price and any withholding taxes are payable
in cash by Nonemployee Directors, although the Board at its discretion may
permit such
14
payment by delivery of shares of Common Stock or by delivery of broker
instructions authorizing payment to the Company of proceeds from the sale of
such shares.
Upon the grant of an option under the 1993 Plan, the person receiving the
grant (the "Option Holder") must enter into a written option agreement with the
Company that contains terms, provisions and conditions that are consistent with
the 1993 Plan and have been determined from time to time by the Committee.
Incentive Stock Options granted under the 1993 Plan may not expire later than
ten years after the date of grant, except that an Incentive Stock Option granted
to an individual owning (after the application of the family and other
attribution rules of Section 424(d) of the Code), at the time the option was
granted, more than 10% of the total combined voting power of all classes of
stock of the Company or of any of its subsidiaries (a "10% Stockholder"), may
not expire later than five years from the date the option is granted. The
exercise price for any Incentive Stock Option may not be less than 100% of the
fair market value of Common Stock of the Company on the date the Option is
granted and the exercise price of an Incentive Stock Option granted to a 10%
Stockholder may not be less than 110% of the fair market value of the Common
Stock of the Company on the date such option is granted. The 1993 Plan provides
that the maximum number of shares of Common Stock that may be issued pursuant to
Incentive Stock Options, in the aggregate, is 1,800,000 shares. The Board has
approved an amendment, subject to stockholder approval, to increase the number
of shares which may be issued pursuant to Incentive Stock Options by 1,000,000
shares to an aggregate of 2,800,000 shares.
An Award granted under the 1993 Plan to an employee may include a provision
terminating the Award upon termination of employment under certain circumstances
or accelerating the receipt of benefits upon the occurrence of specified events,
such as a change of control of the Company or a dissolution, liquidation,
merger, reclassification, sale of substantially all of the property and assets
of the Company or other significant corporate transaction. Options granted to
Nonemployee Directors must be exercised by the fifth anniversary of the date of
grant if the grantee ceases to be a Director of the Company as a result of death
or disability, and the first anniversary after such grantee ceases to be a
Director for any other reason.
AWARDS TO NONEMPLOYEE DIRECTORS
Non-Qualified Stock Options to purchase 10,000 shares of Common Stock are
automatically granted to Nonemployee Directors upon their election to the Board.
Such options will vest in one-third annual installments, with the first
installment vesting on the first anniversary of the date of grant. Non-Qualified
Stock Options to purchase an additional 2,000 shares will be granted each year
commencing with the fourth anniversary of each Nonemployee Director's tenure,
provided such individual continues to serve as a director. Such options will be
fully vested and exercisable at the time of grant. All options granted to
Nonemployee Directors pursuant to the 1993 Plan have a five-year term and an
exercise price equal to the fair market value of the shares on the date of grant
of such option. In addition, each Nonemployee Director receives an Annual
Retainer to be paid as follows: $11,000 in cash, or, at the option of a
Nonemployee Director, in Common Stock of the Company at a 20% discount off the
price of the shares at the closing price at the beginning of the year; and 500
shares of the Common Stock of the Company per quarter.
FEDERAL INCOME TAX TREATMENT FOR THE 1993 PLAN
The following is a brief description of the federal income tax treatment
that will generally apply to Awards made under the 1993 Plan, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of Awards will depend on the specific nature of the Award. Such an
Award may, depending on the conditions applicable to the Award, be taxable as an
option, as restricted or unrestricted stock, as a cash payment, or otherwise.
Because the following is only a brief summary of the general federal income tax
rules, recipients of Awards should not rely thereon for individual tax advice,
as each taxpayer's situation and the consequences of any particular transaction
will vary depending upon the specific facts and circumstances involved. EACH
RECIPIENT OF AN AWARD IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR FOR
PARTICULAR FEDERAL, AS WELL AS STATE AND LOCAL, INCOME AND ANY OTHER TAX ADVICE.
15
Incentive Stock Options
Pursuant to the 1993 Plan, participants who are employees may be granted
Incentive Stock Options. Generally, the optionee is not taxed and the Company is
not entitled to a deduction on the grant or the exercise of an Incentive Stock
Option. However, if the optionee sells the shares acquired upon the exercise of
an Incentive Stock Option (the "Option Shares") at any time within (a) one year
after the date of transfer of shares to the optionee pursuant to the exercise of
such Incentive Stock Option or (b) two years after the date of grant of such
Incentive Stock Option, then (1) such optionee will recognize capital gain in an
amount equal to the excess, if any, of the sales price over the fair market
value of the Option Shares on the date of exercise, (2) such optionee will
recognize ordinary income in an amount equal to the excess, if any, of the
lesser of the sales price or the fair market value of the Option Shares on the
date of exercise, over the exercise price of such Incentive Stock Option, (3)
such optionee will recognize capital loss equal to the excess, if any, of the
exercise price of such Incentive Stock Option over the sales price of the Option
Shares. If the optionee sells the Option Shares at any time after the optionee
has held the Option Shares for at least (a) one year after the date of transfer
of the Option Shares to the optionee pursuant to the exercise of the Incentive
Stock Option and (b) two years after the date of grant of the Incentive Stock
Option, then the optionee will recognize capital gain or loss equal to the
difference between the sales price and the exercise price of such Incentive
Stock Option.
The amount by which the fair market value of Option Shares on the date of
exercise exceeds the exercise price will be included as a positive adjustment in
the calculation of an optionee's "alternative minimum taxable income" ("AMTI")
in the year of exercise. The "alternative minimum tax" imposed on individual
taxpayers is generally equal to the amount by which 28% (26% of AMTI below a
certain amount) of the individual's AMTI (reduced by certain exemption amounts)
exceeds his or her regular income tax liability for the year. A taxpayer's
alternative minimum tax attributable to such excess may be credited against the
taxpayer's regular tax liability in later years to the extent that the regular
tax liability exceeds the alternative minimum tax in any such year. Insiders (as
defined below) should consult their tax advisors concerning the possibility of
making an 83(b) Election (as defined below) upon the exercise of an Award.
Non-Qualified Stock Options
The grant of a Non-Qualified Stock Option is generally not a taxable event
for the optionee. Upon exercise of the option, the optionee will generally
recognize ordinary income in an amount equal to the excess of the fair market
value of the stock acquired upon exercise (determined as of the date of the
exercise) over the exercise price of such option. See, however, "Special Rules
for Awards Granted to Insiders," below. A subsequent sale of the Common Stock
generally will give rise to capital gain or loss equal to the difference between
the sales price and the sum of the exercise price paid for such shares plus the
ordinary income recognized with respect to such shares. If an optionee receives
a Non-Qualified Stock Option having an exercise price that is only a small
fraction of the value of the underlying Common Stock on the date of grant, such
optionee may be required to include the value of the option in taxable income at
the time of grant.
Special Rules for Awards Granted to Insiders
Special rules apply if the recipient of an Award is a director (including a
non-employee director), officer or stockholder subject to Section 16 of the
Exchange Act (an "Insider") and during any period of time a sale of the stock
acquired pursuant to an Award could subject such optionee to suit under Section
16. In such case, the determination of the amount and the timing of income
recognition in connection with the exercise of an option or the receipt of
Common Stock pursuant to other Awards, and the beginning of the holding period
for any Common Stock received, generally may be required to be deferred until
the expiration of any period during which the Insider would be restricted from
disposing of any stock received. An Insider may elect under Section 83(b) of the
Internal Revenue Code, as amended, within 30 days of the exercise date to
recognize ordinary income on the date of exercise (an "83(b) Election"), based
on the value of the Common Stock on that date. Insiders should consult their tax
advisors to determine the tax consequences to them of exercising Options granted
to them pursuant to the 1993 Plan, including the advisability of making the
83(b) Election and the timing and manner of making such an election.
16
Miscellaneous Tax Issues
The tax consequences of Awards other than Incentive Stock Options and
Non-Qualified Stock Options depend on the specific nature and terms of such
Awards. The Company generally will be required to make arrangements for
withholding applicable taxes with respect to any ordinary income recognized by
an employee in connection with Awards made to such employee under the 1993 Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase Common Stock. Interest disallowed under this
rule may be carried forward to and deducted in later years, subject to the same
limitations.
Special rules will apply in cases where a recipient of an Award pays the
exercise or purchase price of the Award or applicable withholding tax
obligations under the 1993 Plan by delivering previously owned Common Stock or
by reducing the amount of Common Stock otherwise issuable pursuant to the Award.
The surrender or withholding of such shares will in certain circumstances result
in the recognition of income with respect to such shares.
The terms of the Awards may provide for accelerated vesting or payment in
connection with a change in ownership or control of the Company or its assets.
In that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such Awards may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payments" and the Company will be denied any deduction with respect to
such payment. Recipients of Awards should consult their tax advisors as to
whether accelerated vesting of an Award in connection with a change of ownership
or control of the Company or its assets would give rise to an excess parachute
payment.
APPLICATION OF CERTAIN LAWS
The acquisition of shares of Common Stock by directors, certain officers,
or 10% stockholders of the Company could be subject to the provisions of Section
16(b) of the Exchange Act under which a purchase of the Company's Common Stock
within six months before or after any sale of such stock could result in
recovery by the Company of all or a portion of any amount by which the sale
proceeds exceed the purchase price. Such officers, directors and 10%
stockholders are required to file reports of changes in beneficial ownership
under Section 16(a) of the Exchange Act. Rule 16b-3 under the Exchange Act
provides an exemption from Section 16(b) liability for certain transactions
pursuant to employee benefit plans. Officers, directors and 10% stockholders
should consult their counsel with respect to the effect of Section 16 upon their
participation in the 1993 Plan.
Resales of shares received on grants of Awards or purchased on exercise of
Awards by any person who has a control relationship with the Company may be
restricted under the provisions of the Securities Act and the rules and
regulations of the Commission, including Rule 144.
APPROVAL OF AMENDMENT TO 1993
EMPLOYEE STOCK INCENTIVE PLAN
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the 1993 Plan to (a) increase the number of
shares of Common Stock reserved for issuance thereunder by 1,000,000 shares,
bringing the total number of shares issuable under the 1993 Plan to 3,000,000
shares, of which 2,800,000 may be issued pursuant to incentive stock options and
(b) to extend the duration of the 1993 Plan for an additional three years. This
amendment will enable the Company to continue its policy of employee stock
ownership as a means to attract and retain highly qualified personnel, to
motivate high levels of performance and to recognize key employee
accomplishments.
17
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The approval of the amendment to the 1993 Plan requires the affirmative
vote of a majority of the shares represented, in person or by proxy, and voting
at the Annual Meeting (which shares voting affirmatively also constitute at
least a majority of the required quorum).
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED
THE AMENDMENT TO THE 1993 PLAN AND RECOMMENDS A VOTE "FOR"
THE APPROVAL OF THE AMENDMENT TO THE 1993 PLAN.
18
PROPOSAL NO. 3
INDEPENDENT AUDITORS
For the 2000 fiscal year, KPMG LLP provided audit services which included
examination of the Company's annual consolidated financial statements. Upon the
recommendation of the Audit Committee, the Board has selected KPMG LLP to
provide audit services to the Company and its subsidiaries for the fiscal year
ending December 31, 2001. The stockholders are being requested to ratify such
selection at the Annual Meeting. A representative of KPMG LLP will attend the
Annual Meeting to make any statements he or she may desire and to respond to
appropriate stockholder questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE ELECTION OF KPMG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 2002 ANNUAL MEETING
Any proposal relating to a proper subject which an eligible stockholder may
intend to present for action at the Company's 2001 Annual Meeting of
Stockholders and which such stockholder may wish to have included in the proxy
materials for such meeting in accordance with the provisions of Rule 14a-8
promulgated under the Exchange Act must be received as far in advance of the
meeting as possible in proper form by the Secretary of the Company at 495-A
South Fairview Avenue, Goleta, California 93117 and in any event not later than
December 6, 2001. It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
OTHER BUSINESS OF THE ANNUAL MEETING
Management is not aware of any matters to come before the Annual Meeting or
any postponement or adjournment thereof other than the election of directors and
the ratification of the selection of the Company's independent auditors.
However, inasmuch as matters of which management is not now aware may come
before the meeting or any postponement or adjournment thereof, the proxies
confer discretionary authority with respect to acting thereon, and the persons
named in such proxies intend to vote, act and consent in accordance with their
best judgment with respect thereto, provided that, to the extent the Company
becomes aware a reasonable time before the Annual Meeting of any matter to come
before such meeting, the Company will provide an opportunity to vote by proxy
directly on such matter. Upon receipt of such proxies in time for voting, the
shares represented thereby will be voted as indicated thereon and as described
in this Proxy Statement.
19
MISCELLANEOUS
The solicitation of proxies is made on behalf of the Company and all the
expenses of soliciting proxies from stockholders will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, officers and
regular employees may communicate with stockholders personally or by mail,
telephone, telegram or otherwise for the purpose of soliciting such proxies, but
in such event no additional compensation will be paid to any such persons for
such solicitation. The Company will reimburse banks, brokers and other nominees
for their reasonable out-of-pocket expenses in forwarding soliciting material to
beneficial owners of shares held of record by such persons.
BY ORDER OF THE BOARD OF DIRECTORS
DOUGLAS B. OTTO
Chairman of the Board and
Chief Executive Officer
Goleta, California
April 6, 2001
20
APPENDIX A
DECKERS OUTDOOR CORPORATION
CHARTER
OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors.
- Provide an avenue of communication among the independent auditors,
management and the Board of Directors.
The Audit Committee has the authority to conduct investigations appropriate
to fulfilling its responsibilities, and it has direct access to the independent
auditors as well as personnel of the Company. The Audit Committee has the
authority to retain, at the Company's expense, special legal, accounting or
other consultants or experts it deems necessary to carry out its duties and
responsibilities.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the Nasdaq Stock
Exchange, including Nasdaq Marketplace Rule 4460(d). The Audit Committee shall
be comprised of three or more directors as determined by the Board, each of whom
shall be independent nonexecutive directors. All members of the Audit Committee
shall have a basic understanding of finance and accounting, as evidenced by
their ability to read and understand fundamental financial statements, and at
least one member of the Audit Committee shall have accounting or related
financial management expertise. Financial management expertise shall mean past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer, or other senior
officer with financial oversight responsibilities.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Audit Committee
may designate a Chair by majority vote of the Audit Committee membership.
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting. The Audit Committee should
meet privately in executive session at least annually with management, the
independent auditors, and as a committee to discuss any matters that the Audit
Committee or each of these groups believe should be discussed. In addition, the
Audit Committee, through any of its members, should communicate with management
and the independent auditors quarterly to review the Company's financial
statements and significant findings based upon the auditors' limited review
procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURES
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have the document
published at least every three (3) years in accordance with Securities and
Exchange Commission ("SEC") regulations.
A-1
2. Review the Company's annual audited financial statements prior to filing
or distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices and judgments.
3. In consultation with management and the independent auditors, consider
the integrity of the Company's financial reporting processes and controls.
Discuss significant financial risk exposures and the steps management has taken
to monitor, control and report such expenses. Review significant findings
prepared by the independent auditors together with management's responses.
4. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of earnings and/or
the Company's quarterly financial statements prior to filing or distribution.
Discuss any significant changes to the Company's accounting principles and any
items the independent auditors are required to communicate in accordance with
SAS 61 (see item 9). The Chair of the Audit Committee may represent the entire
Audit Committee for purposes of this review.
INDEPENDENT AUDITORS
5. Review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent auditors
or approve any discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. Review and discuss with the independent auditors all significant
relationships they have with the Company that could impair the auditors'
independence.
8. Review the independent auditors' audit plan, and discuss scope,
staffing, locations, reliance upon management and general audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. When appropriate, discuss certain matters
required to be communicated to Audit Committees in accordance with AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
LEGAL COMPLIANCE
11. When deemed appropriate in the discretion of the Audit Committee, or at
least annually, review with the Company's counsel (1) any legal matters that
could have a significant impact on the organization's financial statements, (2)
the Company's compliance with applicable laws and regulations, and (3) inquiries
received from regulators or governmental agencies.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
12. Annually prepare a report to shareholders as required by the SEC. The
report should be included in the Company's annual proxy statement.
13. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Audit Committee or the Board deems
necessary or appropriate.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
A-2
PROXY
DECKERS OUTDOOR CORPORATION
495-A South Fairview Avenue
Goleta, California 93117
This Proxy is solicited on Behalf of the Board of Directors of Deckers Outdoor
Corporation. The undersigned hereby appoints Douglas B. Otto and M. Scott Ash,
and each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote as designated below,
all the shares of common stock of Deckers Outdoor Corporation held of record by
the undersigned on March 26, 2001, at the Annual Meeting of Shareholders to be
held on May 23, 2001 and any postponements or adjournments thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
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