<PAGE>
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 /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MOSSIMO, INC.
- --------------------------------------------------------------------------------
(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):
/X/ No fee required.
/ / 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:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
MOSSIMO, INC.
9 PASTEUR
IRVINE, CALIFORNIA 92618
(714) 789-0200
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
------------------------
To Our Stockholders:
The Annual Meeting of Stockholders of Mossimo, Inc. (the "Company") will be
held at the Company's headquarters and distribution facility, 5 Pasteur, Irvine,
California 92618, on May 21, 1998, at 10:00 a.m. for the following purposes:
(1) To elect one director to serve a three-year term and one director to
serve a two-year term;
(2) To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The Board of Directors has fixed April 3, 1998 as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE
AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE
ENCLOSED FOR THAT PURPOSE.
By Order of the Board of Directors
/s/ Thora B. Thoroddsen
SECRETARY
Irvine, California
April 20, 1998
<PAGE>
y
9 PASTEUR
IRVINE, CALIFORNIA 92618
(714) 789-0200
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION ON THE MEETING
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Mossimo, Inc. ("Mossimo" or the "Company") in connection with the
Annual Meeting of Stockholders to be held at 10:00 a.m. on May 21, 1998, at the
Company's headquarters and distribution facility, 5 Pasteur, Irvine, California
92618, and at any and all adjournments thereof (the "Annual Meeting").
This Proxy Statement and accompanying proxy will first be mailed to
stockholders on or about April 22, 1998. The Company will pay the costs of
solicitation of proxies. In addition to soliciting proxies by mail, the
Company's officers, directors and other regular employees, without additional
compensation, may solicit proxies personally or by other appropriate means. The
Company will reimburse brokers, banks, fiduciaries and other custodians and
nominees holding Common Stock in their names or in the names of their nominees
for their reasonable charges and expenses in forwarding proxies and proxy
materials to the beneficial owners of such Common Stock.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record of the Company's Common Stock as of April 3,
1998 will be entitled to vote at the Annual Meeting. On April 3, 1998, there
were 15,008,593 outstanding shares of Common Stock, which constituted all of the
outstanding voting securities of the Company. Each share of Common Stock is
entitled to one vote on all matters to come before the Annual Meeting.
A majority of the outstanding shares of common stock of the Company entitled
to vote at the Annual Meeting must be represented at the Annual Meeting in order
for there to be a quorum for the conduct of business at the meeting. Abstentions
and broker non-votes (i.e. shares held by a broker which are represented at the
Annual Meeting, but with respect to which such broker is not authorized to vote
on the particular proposal) will be counted as shares present and entitled to
vote for purposes of determining a quorum.
All shares represented by each properly executed, unrevoked proxy received
by the Company prior to the vote will be voted in the manner specified. If the
manner of voting is not specified, the proxy will be voted FOR election to the
Board of Directors of the two nominees listed.
REVOCABILITY OF PROXIES
Proxies must be written, signed by the stockholder and returned to the
Secretary of the Company prior to the vote. Any stockholder who signs and
returns a proxy may revoke it at any time before it is voted by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
date later than the date of the proxy being revoked. Any stockholder attending
the Annual Meeting in person may withdraw such stockholder's proxy and vote such
stockholder's shares.
<PAGE>
DIRECTORS
The Bylaws of the Company provide that the authorized number of directors
shall range from two to five, with the exact number set by resolution of the
Board of Directors. On March 4, 1998, the Board set the authorized number of
directors at four. The Board of Directors is divided into three classes, with
the terms of each class ending in successive years. Eric R. Hohl resigned as a
director and executive officer of the Company effective as of November 11, 1997.
In accordance with the Company's Bylaws, the Board of Directors reappointed Mr.
Martini from Class III to Class II, leaving no directors in Class III. Subject
to re-election of Mr. Martini at the Annual Meeting, his term of office as a
Class II director will expire two years following the Annual Meeting, as opposed
to his previous position as a Class III director with a term of office expiring
three years following the Annual Meeting. Two directors are to be elected at the
Annual Meeting, one director, Mr. Stafford, to hold office for a term of three
years expiring at the third succeeding Annual Meeting (i.e. in 2001), and one
director, Mr. Martini, for a term of two years expiring at the second succeeding
Annual Meeting (i.e. in 2000). Certain information with respect to the nominees
for election as directors at the Annual Meeting and the other directors whose
terms of office will continue after the Annual Meeting is set forth below.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
- ------------------------------ --------------------------------------------------------------------------- ---
<S> <C> <C>
NOMINEE FOR RE-ELECTION WITH A TERM OF OFFICE TO EXPIRE IN THREE YEARS
JOHN H. STAFFORD Mr. Stafford was appointed a director of the Company in October 1996 and 77
has served on the Audit Committee of the Board of Directors since November
1996. Mr. Stafford is a retired partner of the accounting firm KPMG
Peat-Marwick where he worked for 30 years. Mr. Stafford is currently also a
board member of Virco Mfg. Corporation.
NOMINEE FOR RE-ELECTION WITH A TERM OF OFFICE TO EXPIRE IN TWO YEARS
ROBERT MARTINI Mr. Martini was appointed a director of the Company in October 1996 and has 65
served on the Compensation Committee of the Board of Directors since
November 1996. Mr. Martini has been Chairman of the Board of Directors of
Bergen Brunswig Corporation since 1992. A 40-year veteran of Bergen
Brunswig Corporation, Mr. Martini held several management positions
including President from 1981 to 1992 and Chief Executive Officer from 1990
to 1997. Bergen Brunswig Corporation is a major domestic supplier of
pharmaceuticals and medical-surgical products with annual sales of
approximately $12 billion.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
- ------------------------------ --------------------------------------------------------------------------- ---
DIRECTORS WHOSE TERMS OF OFFICE EXPIRE IN ONE YEAR
<S> <C> <C>
MOSSIMO G. GIANNULLI Mr. Giannulli founded the Company's business in 1987 and has been Chairman 34
of the Board since the Company's formation in 1988 and Visionary since
March 4, 1998. Mr. Giannulli was the Company's President from the Company's
formation in 1988 to March 4, 1998 and its Chief Executive Officer from
November 1995 to March 4, 1998.
FRANCESCA RUIZ DE LUZURIAGA Ms. Luzuriaga was appointed a director of the Company in October 1996 and 44
has served as a member of the Audit Committee and Compensation Committee of
the Board of Directors since November 1996. Ms. Luzuriaga has been
Executive Vice President of Worldwide Business Planning and Resources of
Mattel, Inc. since May 1997. Before holding her current positions at
Mattel, Inc., Ms. Luzuriaga served as Senior Vice President and Treasurer
from October 1992 until May 1993, Executive Vice President of Finance and
Marketing Administration from May 1993 until December 1994, Executive Vice
President of Finance from December 1994 until December 1995 and Executive
Vice President and Chief Financial Officer from December 1995 to May 1997.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five meetings and took action by written consent
three times during 1997. Only Mr. Hohl attended fewer than 75% of the Board
meetings and committee meetings of which he was a member. The Board of Directors
has a standing Audit Committee and Compensation Committee, but does not have a
nominating committee.
The Audit Committee is currently comprised of Francesca Ruiz de Luzuriaga
and John H. Stafford. It is responsible for reviewing audit results and the
adequacy of the Company's systems of internal control, appointing or discharging
the Company's independent auditors, and reviewing each professional service of a
non-audit nature to be provided by the independent auditors to evaluate the
impact of the independence of the auditors undertaking such added services. The
Audit Committee met twice in fiscal 1997.
The Compensation Committee is currently comprised of Ms. Luzuriaga and
Robert Martini. It is responsible for recommending to the Board of Directors the
base salary and incentive compensation for all executive officers, taking final
action with respect to base salary and incentive compensation for certain other
officers and key employees and reviewing the Company's compensation policies and
management actions to assure succession of qualified officers. The Compensation
Committee administers the Company's 1995 Stock Plan (the "Stock Plan") and
Employee Stock Purchase Plan. The Compensation Committee took action by written
consent four times in fiscal 1997.
DIRECTORS' COMPENSATION
Non-employee directors receive $10,000 annually as compensation for serving
on the Board of Directors. All directors are reimbursed for their reasonable
expenses incurred in attending meetings. Non-employee directors participate in
the Company's 1995 Non-Employee Directors Stock Option Plan (the "Directors
Plan"), which provides for automatic grants of options to each non-employee
director at the then current market price for the Company's stock. Under the
Directors Plan, each non-employee director is granted an option for 30,000
shares upon initial appointment or election to the Board, and an annual grant of
an option for 3,000 shares upon the date of each annual meeting of the Company's
stockholders at which such director is re-elected or continues as a director.
The initial options for 30,000 shares vest 50%
3
<PAGE>
per year commencing on the first anniversary of the date of grant, and the
options for 3,000 shares fully vest on the first anniversary of the date of
grant.
Messrs. Martini and Stafford, and Ms. Luzuriaga were each granted options on
May 28, 1997 to purchase 3,000 shares of the Company's Common Stock at an
exercise price equal to $7.75 pursuant to the Directors Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
The following individuals are nominated for election as directors to hold
office for a term expiring as follows:
<TABLE>
<CAPTION>
NOMINEE TERM EXPIRES
- ------------------------ ---------------------------------------
<S> <C>
John Stafford Third succeeding Annual Meeting
Robert Martini Second succeeding Annual Meeting
</TABLE>
The nominees listed above are members of the Board of Directors. All proxies
received by the Board of Directors will be voted FOR the nominees if no
directions to the contrary are given. In the event that one or both nominees are
unable or decline to serve, an event that is not anticipated, the proxies will
be voted for the election of a nominee or nominees designated by the Board of
Directors, or if none are so designated, will be voted according to the judgment
of the person or persons voting the proxy.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors. Abstentions and
broker non-votes as to the election of directors will not affect the election of
directors receiving the plurality of votes.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES.
MANAGEMENT
The following table sets forth certain information concerning the executive
officers of the Company as of March 31, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Mossimo G. Giannulli............ 34 Chairman of the Board and Visionary
John P. Brincko................. 55 President and Chief Executive Officer
Opala D. Avdiu.................. 28 Vice President--Men's Sales
Laura A. Landis................. 35 Vice President--Production and Merchandising
Pamela A. Sargeant.............. 36 Vice President--Women's Sales
Thora B. Thoroddsen............. 35 Secretary, Treasurer and Controller
</TABLE>
Background information on Mr. Giannulli is set forth under "Directors"
above.
Mr. Brincko joined Mossimo in January 1998 as a consultant and was elected
President and Chief Executive Officer in March 1998. Mr. Brincko is a general
management and finance oriented consultant with particular expertise in advising
and managing companies experiencing cash flow and profit problems, formulating
turnaround strategies, restructuring organizational plans and finances, and
mergers and acquisitions. In 1979 Mr. Brincko founded Brincko Associates, Inc.,
an international management consulting firm providing advisory services to
financially troubled companies and their investors, and has served as its
president and chief executive officer since inception. Mr. Brincko also has
served as: president and chief operating officer of Barneys New York, a retailer
of upscale clothing and accessories, from July 1996 to August 1997; president
and chief executive officer of Sun World International, Inc., a worldwide grower
4
<PAGE>
and marketer of fresh fruits and vegetables, from September 1994 to April 1996;
president and chief executive officer of Sahlen Enterprises, an investigative
and security company, from 1989 to 1994; and chief executive officer of Knudsen
Foods, Inc., Foremost Dairies, Inc. and Winn Enterprises, a real estate
investment trust, from 1986 to 1991.
Ms. Avdiu joined Mossimo in December 1997 as Vice President of Men's Sales
and was appointed an executive officer of the Company in March 1998. Prior to
joining Mossimo, Ms. Avdiu was the Retail Sales Manager and Director of Retail
Analysis for BUM Equipment from 1993 to 1994 and as Regional Sales Manager for
Pepe Jeans, a division of Tommy Hilfiger, from 1994 until joining the Company.
Ms. Landis joined Mossimo in August 1996 as Vice President of Production and
Merchandising and was appointed an executive officer of the Company in March
1998. Prior to joining Mossimo, Ms. Landis worked for Banana Republic in various
capacities including Senior Merchandise Manager of Men's from 1987 to 1995 and
as Divisional Merchandise Manager of Apparel for the Home Shopping Network from
1995 until joining the Company. Ms. Landis graduated from Drexel University with
a B. S. degree in Merchandising.
Ms. Sargeant joined Mossimo in 1995 as Vice President of Women's Sales and
was appointed an executive officer of the Company in March 1998. From 1986 until
joining the Company, Ms. Sargeant worked for Guess Jeans in various capacities
including Director of Merchandise Coordinators and Shop Development, Director of
Retail Stores and most recently as National Sales Manager of Women's. Ms.
Sargeant graduated from the University of San Diego with a B. S. degree in
Business Administration.
Ms. Thoroddsen joined Mossimo in June 1997 as Controller and was appointed
Treasurer and Secretary in March 1998. From January 1993 until joining the
Company, Ms. Thoroddsen worked for Coldwell Banker Relocation Services, most
recently as Manager of Financial Reporting. Ms. Thoroddsen holds an MBA from
Claremont Graduate School, a Masters in Economics from California State
University, Long Beach and a B.S. in Accounting and Auditing from the University
of Iceland.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain information regarding the
compensation for each of the last three years of: (i) the Chief Executive
Officer, (ii) each of the four most highly compensated executive officers who
were serving as executive officers as of December 31, 1997 and whose annual
salary and bonus exceeded $100,000 and (iii) not more than two other executive
officers who would have qualified under clause (ii) but for the fact that such
person was not serving as an executive officer of the Company as of December 31,
1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
OTHER ------------
ANNUAL COMPENSATION ANNUAL SECURITIES
------------------------ COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS (#) COMPENSATION ($)(1)
- --------------------------------- ---- ---------- --------- ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Mossimo G. Giannulli............. 1997 500,000 0 0 0 2,400
Chief Executive Officer 1996 500,000 0 0(2) 0 2,300
1995 180,000 0 176,700(3) 0 2,000
Andrew L. Crane (4).............. 1997 194,600 0 0 0 2,100
Vice President--Operations 1996 179,900 29,300 0 65,000 1,800
1995 84,000 173,400 54,700(5) 0 1,300
Eric R. Hohl (6)................. 1997 220,000 0 0 0 2,100
Executive Vice President and 1996 129,300 40,000 0 60,000 400
Chief Operating Officer 1995 99,000 40,000 0 0 1,300
Donald A. Kerkes (7)............. 1997 238,500 0 18,900(8) 0 0
Vice President--Men's Sales 1996 245,200 0 108,600(8) 10,000 700
1995 240,000 0 0 0 0
</TABLE>
- ------------------------
(1) Represents Company contributions to the accounts of the specified executive
officers under the Company's 401(k) Plan.
(2) Does not include distributions of approximately $17,636,000, of which
approximately $9,559,000 was for the payment of federal and state income
taxes on the Company's income.
(3) Includes expenses related to personal products. Does not include
distributions of approximately $17,164,000, of which approximately
$9,306,000 was for the payment of federal and state income taxes on the
Company's income.
(4) Mr. Crane resigned his employment with the Company effective January 19,
1998.
(5) Bonus paid in the form of an automobile.
(6) Mr. Hohl resigned his employment with the Company effective November 11,
1997. Compensation stated is for the period from January 1, 1997 through
November 11, 1997.
(7) Mr. Kerkes resigned his employment with the Company effective November 21,
1997. Compensation stated is for the period from January 1, 1997 through
November 21, 1997.
(8) Earned pursuant to commission based on the invoice amounts of net shipments
of the Company's men's apparel for each quarter of the calendar year
pursuant to an Employment Agreement.
6
<PAGE>
OPTION GRANTS, OPTION VALUES AND OPTION EXERCISES
No stock options or stock appreciation rights were granted to any Named
Executive Officers during fiscal 1997. None of the Named Executive Officers
exercised any options during fiscal 1997 and none of the Named Executive
Officers held any exercisable or unexercisable options as of December 31, 1997.
None of the Company's outstanding options were in-the-money at December 31, 1997
or at April 3, 1998.
EXECUTIVE EMPLOYMENT, INCLUDING SEPARATION, AGREEMENTS
Mr. Giannulli entered into an employment agreement with the Company in
December 1995 pursuant to which Mr. Giannulli agreed to serve as the Company's
Chief Executive Officer and President. The agreement has a term of three years
and contains a non-competition provision effective through the term of
employment and for an additional two years from the end of such term. Pursuant
to the agreement, the Company agreed to pay Mr. Giannulli a base salary of
$500,000 per year and, at the discretion of the Board of Directors, a bonus.
Commencing on the expiration of the term of the employment agreement, or earlier
should the employment agreement be terminated prior to the end of the term, the
Company and Mr. Giannulli will enter into a two-year consulting agreement under
which he will render certain consulting services for which the Company will pay
an annual consulting fee of $100,000 per year. In addition, Mr. Giannulli will
also be entitled to certain other fringe benefits, including use of a Company-
owned automobile. If Mr. Giannulli is terminated other than for cause, death or
disability, the Company will pay Mr. Giannulli an amount equal to his base
salary then in effect for the remaining term of the agreement.
In January 1998, Mr. Giannulli voluntarily reduced his salary from $500,000
to $300,000 for 1998. In March 1998, Mr. Giannulli resigned his titles of Chief
Executive Officer and President and was appointed the Company's Visionary. He
has retained his position as the Company's Chairman of the Board.
Brincko Associates Inc. ("Brincko Associates") entered into a consulting
agreement with the Company in January 1998 for the provision of services by Mr.
Brincko, which agreement was amended in March 1998 to provide that Mr. Brincko
will serve as the Company's Chief Executive Officer and President. Pursuant to
the agreement, the Company paid Brincko Associates an initial fee of $50,000 and
thereafter monthly fee of $65,000 commencing February 1998 and continuing
through the end of 1998 and, at the Company's option, for an additional
six-month term. Additionally, the agreement includes a grant of options covering
a total of 100,000 shares, including an option to purchase (i) 25,000 shares at
the fair market value on February 12, 1998; (ii) 50,000 shares at the fair
market value on March 4, 1998; and, (iii) 25,000 shares at the fair market value
on May 12, 1998.
Ms. Avdiu entered into an employment agreement with the Company in December
1997 pursuant to which Ms. Avdiu agreed to serve as National Sales
Manager--Men's. The employment agreement has no term and includes a signing
bonus of $73,000. The employment agreement also provides that if Ms. Avdiu is
terminated within the first 24 months of employment the Company will provide her
with compensation amounting to the difference between her new compensation with
a new employer and her compensation with the Company for the balance of the 24
month period. Under her employment agreement, Ms. Avdiu will receive a base
salary of $260,000, subject to annual increases or reductions at the Company's
discretion.
Ms. Sargeant entered into an employment agreement with the Company in
September 1995 pursuant to which Ms. Sargeant agreed to serve as National Sales
Manager--Mossimo Women's Division. The employment agreement has no term and
provides for an initial base salary of $200,000 plus a commission override for
women's sales over $5,000,000 up to a maximum of $250,000,000 at rates ranging
from .6% to .1% of the related sales. Ms. Sargeant received a bonus of $57,700
in 1997 related to the commission override portion of her agreement.
Mr. Kerkes entered into an employment agreement with the Company in November
1994 pursuant to which Mr. Kerkes served as the Company's Vice-President--Sales
(Men's) until the agreement was
7
<PAGE>
terminated in November 1997. The agreement was terminable at will by the Company
and upon 60 days' notice by Mr. Kerkes. The agreement contained a
non-competition provision effective through the term of employment. Pursuant to
the agreement, the Company was obligated to pay Mr. Kerkes a monthly draw of
$20,000 netted against a quarterly commission based on the invoice amount of net
shipments of the Company's men's apparel for each quarter of the calendar year.
The commission rates were set at .5% on the first $100 million of such
shipments, .4% on the next $50 million, .3% on the next $50 million and .2% on
such shipments in excess of $200 million.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Ms.
Luzuriaga and Mr. Martini, neither of whom are employees of, or otherwise
affiliated with, the Company. All executive officer compensation related
decisions with respect to 1997 were made by the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of your Board of Directors is
pleased to present its annual report which is intended to update stockholders
regarding the Company's executive compensation program. This report summarizes
the Committee's executive compensation philosophy, and the basis on which the
compensation for the chief executive officer, corporate officers and other key
executives was determined for the calendar year ended December 31, 1997.
During the 1997 fiscal year, the Committee was comprised of the following
Board Members, each of whom was a non-employee director of the Company:
Francesca Ruiz de Luzuriaga and Robert Martini. The Committee's responsibilities
were to review and determine the compensation paid to corporate officers and key
executives, and administer the stock incentive plan.
EXECUTIVE COMPENSATION PHILOSOPHY
The general philosophy of the Compensation Committee is to link overall
executive compensation with the performance of the Company and the individual
executive. The focus is on both annual and long-term incentives. The
Compensation Committee recognizes that the success and growth of the Company
depends on the efforts and commitment of its key employees. By providing a
combination of incentives to the key employees of the Company, the Committee not
only rewards those efforts, but provides a means by which those employees can
share in the Company's success.
The Company's compensation and benefits programs are designed to promote
desired financial and operational results and thus create value for the
stockholders, by attracting, motivating, and assisting in the retention of key
employees with outstanding ability. The programs also are designed to align the
interests of management with the stockholders of the Company. In addition,
compensation programs are designed to promote teamwork and resourcefulness on
the part of key employees whose performance and responsibilities directly affect
Company profits.
Section 162(m) of the Internal Revenue Code of 1986, as amended, currently
imposes a $1 million limitation on the deductibility of certain compensation
paid to the Company's five highest paid executives. Excluded from the limitation
is compensation that is "performance based." For compensation to be performance
based, it must meet certain criteria, including being based on predetermined
objective standards approved by stockholders. The Committee intends to design
the Company's compensation to conform to IRC Section 162(m) and related
regulations so that total compensation paid to any employee will not exceed $1
million in any one year, except for compensation payments which qualify as
"performance based." The Company may, however, pay compensation which is not
deductible in limited circumstances when sound management of the Company so
requires.
8
<PAGE>
EXECUTIVE COMPENSATION COMPONENTS
The following is a discussion of the principal components of the executive
compensation program for fiscal 1997, each of which is intended to serve the
Company's overall compensation philosophy.
BASE SALARY. The Named Executive Officers of the Company who have entered
into employment agreements are compensated in accordance with those agreements,
which agreements were approved by the Board of Directors. Those executives who
have not entered into employment agreements with the Company and those whose
employment agreements provide for an adjustment of their base salary are
reviewed annually and their compensation is determined through an assessment of
individual performance against assigned objectives and key qualitative factors
that include personal accomplishments, strategic impact, and career contribution
to the Company.
ANNUAL BONUS. All executive officers, including the Chief Executive
Officer, are eligible to receive an annual bonus based upon their individual
performance against assigned objectives and the financial performance of the
Company. None of the Named Executive Officers received a bonus in 1997.
LONG TERM INCENTIVE COMPENSATION. The primary purpose of the Company's
long-term incentive compensation is to encourage and facilitate personal stock
ownership by the executive officers and thus strengthen their personal
commitments to the Company and provide a longer-term perspective in their
managerial responsibilities. This component of an executive officer's
compensation directly links the officer's interests with those of the Company's
other stockholders. In addition, long-term incentives encourage management to
focus on the long-term development and prosperity of the Company in addition to
annual operating profits. The Company's primary means of long term incentive
compensation are stock options.
The goal of the stock option program is to provide a compensation program
that is competitive within the Company's industry while directly linking a
significant portion of the executive's compensation to the enhancement of
stockholder value. The ultimate value of any stock option is based solely on the
increase in value of the shares over the grant price. Accordingly, stock options
have value only if the stock price appreciates from the date of grant. This
at-risk component of compensation focuses executives on the creation of
stockholder value over the long-term and encourages equity ownership in the
Company. In 1997, the Company granted 11 employees options to purchase an
aggregate of 90,600 shares. None of the Named Executive Officers received option
grants during 1997.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Mr. Giannulli's compensation
is set by the terms of his employment agreement with the Company, which
agreement was approved by the Board of Directors of the Company in 1995. The
terms of this agreement are discussed above under the caption "Executive
Employment, Including Severance Agreements." During 1997, Mr. Giannulli,
received a base salary of $500,000 in accordance with his employment agreement.
Mr. Giannulli did not receive an annual bonus and was not granted any stock
options in 1997. In January 1998, Mr. Giannulli voluntarily reduced his base
salary to $300,000 for 1998. In March 1998, Mr. Giannulli resigned his titles as
Chief Executive Officer and President and was appointed the Company's Visionary.
Dated: March 10, 1998
Francesca Ruiz de Luzuriaga
Robert Martini
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE TO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE
COMPANY SPECIFICALLY INCORPORATES SAME BY REFERENCE.
9
<PAGE>
CERTAIN TRANSACTIONS
Upon the consummation of its initial public offering in February 1996, the
Company's S Corporation status was terminated. Prior to the close of its public
offering, the Company distributed the remaining portion of its and its
predecessor's previously earned and undistributed taxable S Corporation earnings
through the date of termination of the Company's S Corporation status to Mossimo
G. Giannulli, its sole stockholder prior to the public offering, in the form of
a promissory note. Currently, there is $362,000 still outstanding on the note
which has no due date and is non-interest bearing.
In January 1998, the Company entered into a consulting agreement with
Brincko Associates, of which John Brincko, the Company's Chief Executive Officer
and President, is the principal executive officer. Through March 31, 1998, the
Company had paid Brincko Associates approximately $90,000 for consulting
services and reimburseable expenses in addition to the fees paid for the
services of Mr. Brincko, which are discussed above in "Executive
Compensation--Employment, Including Separation, Agreements."
COMPARATIVE PERFORMANCE BY THE COMPANY
The Securities and Exchange Commission requires the Company to present a
chart comparing the cumulative total stockholder return on its Common Stock with
the cumulative total stockholder return on (1) a broad equity market index and
(2) a published industry index or peer group. Although the chart would normally
be for a five-year period, the common stock of the Company began public trading
on February 23, 1996 and, as a result, the following chart commences as of such
date. This chart compares the common stock with (1) the S & P 500 Composite
Index and (2) the S & P Textile (Apparel Manufacturers) Index, and assumes an
investment of $100 on February 23, 1996 in each of the Company's Common Stock,
the stocks comprising the S & P 500 Composite Index and the stocks comprising
the S & P Textile (Apparel Manufacturers) Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL SHAREHOLDER RETURNS
<S> <C> <C> <C>
MOSSIMO, INC. TEXTILES (APPAREL) 500 S&P 500 INDEX
2/23/96 $ 100 $ 100 $ 100
12/31/96 $ 69 $ 127 $ 112
12/31/97 $ 20 $ 136 $ 147
YEAR ENDING
</TABLE>
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1998, with
respect to Common Stock of the Company owned by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each director and director nominee of the Company, (iii) each Named
Executive Officer and (iv) all current directors and executive officers of the
Company as a group. Except as noted below, and subject to applicable community
property and similar laws, each stockholder has sole voting and investment
powers with respect to the shares shown.
<TABLE>
<CAPTION>
OPTIONS TOTAL NUMBER OF
NUMBER OF SHARES EXERCISABLE SHARES PERCENT OF SHARES
NAME OF COMMON STOCK WITHIN 60 DAYS BENEFICIALLY OWED OF COMMON STOCK
- ----------------------------------------- ----------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Mossimo G. Giannulli..................... 10,372,222 0 10,372,222 69.1%
Andrew L. Crane(1)....................... 0 0 0 *
Eric R. Hohl(1).......................... 0 0 0 *
Donald A. Kerkes(1)...................... 0 0 0 *
Robert Martini........................... 33,000 18,000 51,000 *
John H. Stafford......................... 4,000 18,000 22,000 *
Francesca Ruiz de Luzuriaga.............. 0 18,000 18,000 *
All directors and executive officers as a
group (9 persons)....................... 10,409,222 54,000 10,463,222 69.7%
</TABLE>
- ------------------------
* Less than one percent.
(1) Messrs. Crane, Hohl and Kerkes are no longer employed by the Company
effective as of January 19, 1998, November 14, 1997 and November 20, 1997,
respectively.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than ten percent of the Company's
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of the Common Stock of the
Company. To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, the Company believes that all of its officers and
directors and greater than ten percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them with respect to
transactions during the fiscal year ended December 31, 1997.
APPOINTMENT OF INDEPENDENT AUDITORS
Effective May 29, 1997, Anthony C. Cherbak ("Cherbak"), Executive Vice
President and Chief Financial Officer of Mossimo, resigned as an officer of
Mossimo for personal and family reasons and rejoined his former employer,
Deloitte & Touche, LLP ("Deloitte & Touche"). Prior to such time, Deloitte &
Touche were the Company's independent accountants. As a result of Cherbak
rejoining Deloitte & Touche, the accounting firm would not be independent of the
Company pursuant to Rule 101-1 of the American Institute of Certified Public
Accountants Professional Standards. Deloitte & Touche thus resigned as the
Company's principal accountant effective May 21, 1997. The Board accepted such
resignation.
Deloitte & Touche's reports on the Company's financial statements for each
of the two fiscal years ended December 31, 1996 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified as to uncertainty,
audit scope, or accounting principles. During the Company's two fiscal years
ended December 31, 1996 and any subsequent interim period through May 21, 1997,
there were no disagreements between the Company and Deloitte & Touche on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not
11
<PAGE>
resolved to the satisfaction of Deloitte & Touche, would have caused it to make
a reference to the subject matter of the disagreements in connection with its
reports.
Effective June 13, 1997, the Company engaged Arthur Andersen LLP as its
principal accountant. Such engagement was approved by the Audit Committee of the
Company's Board of Directors. During the Company's two fiscal years ended
December 31, 1996 and any subsequent interim period through June 13, 1997, the
Company did not consult Arthur Andersen & Co. regarding the application of
accounting principles to a specified transaction, the type of audit opinion that
might be rendered on the Company's financial statements or any matter that was
the subject of disagreement or a reportable event.
The Company has selected Arthur Andersen LLP as its independent auditors for
the year ending December 31, 1998. Representatives of Arthur Anderson LLP are
expected to be present at the Annual Meeting and will be available to respond to
appropriate questions and to make such statements as they may desire.
STOCKHOLDER PROPOSALS
Pursuant to the Company's Bylaws, no business proposal will be considered
properly brought before the next annual meeting by a stockholder, and no
nomination for the election of directors will be considered properly made at the
1999 annual meeting by a stockholder, unless notice thereof, which contains
certain information required by the Bylaws, is provided to the Company no later
than 60 days nor more than 90 days, prior to the next annual meeting. The 1999
Annual Meeting is expected to be on or about May 20, 1999.
Thus, any stockholder intending to submit to the Company a proposal for
inclusion in the Company's Proxy Statement and proxy for the 1999 Annual Meeting
must submit such proposal so that it is received by the Company no earlier than
February 19, 1999 and no later than March 22, 1999. Stockholder proposals should
be submitted to the Secretary of the Company. No stockholder proposals were
received for inclusion in this proxy statement.
OTHER MATTERS
While the Notice of Annual Meeting of Stockholders calls for the transaction
of such other business as may properly come before the meeting, the Board of
Directors has no knowledge of any matters to be presented for action by the
stockholders other than as set forth above. The enclosed proxy gives
discretionary authority to the Board of Directors, however, to consider any
additional matters that may be presented.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report for the year ended December 31, 1997, which
includes the Company's 1997 annual report on form 10-K (without exhibits) as
filed with the Securities and Exchange Commission, is being mailed to
stockholders together with this Proxy Statement.
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Thora B. Thoroddsen
SECRETARY
Irvine, California
April 20, 1998
12
<PAGE>
- ------------------------------------------------------------------------------
MOSSIMO, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Mossimo Giannulli and John Brincko, or either
of them, with unlimited power of substitution, as Proxies to represent the
undersigned at the Annual Meeting of Stockholders of Mossimo, Inc., to be
held on Thursday, May 21, 1998, at the Corporate headquarters and
distribution center, 5 Pasteur, Irvine, California 92618, at 10:00 a.m., or
any adjournment or adjournments thereof, and to vote, as directed, all shares
of Common Stock, which the undersigned would be entitled to vote if then
personally present.
CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- ------------------------------------------------------------------------------
Please mark
votes as in /X/
this example
FOR WITHHELD
ITEM 1. Election of John H. Stafford to the Board of Directors
for a three-year term and Robert Martini to the Board / / / /
for a two-year term.
[Instruction: To Withhold Authority to vote for one nominee, draw a line
through (or otherwise strike out) the nominee's name in the list above]
ITEM 2. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR, AND AS SUCH PROXIES DEEM
ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Yes No
1. Do you plan to attend the Annual
Meeting of Stockholders on May 21, / / / /
1998 at 10:00 a.m.?
2. Has your address changed? If so, please provide the new
address below.
- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
Signature(s) Date
---------------------------------------------- ----------
NOTE: Please sign exactly as your name appears above. If stock is registered
in the name of two or more persons, each should sign. Executors,
administrators, trustees, guardians, attorneys, and corporate officers
should show their full titles.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
