<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:
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(2) Aggregate number of securities to which transaction applies:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2000
------------------------
To Our Stockholders:
The Annual Meeting of Stockholders of Mossimo, Inc. (the "Company") will be
held at the Radisson Plaza Hotel Minneapolis, 35 South 7th Street, Minneapolis,
Minnesota 55402, on May 22, 2000 at 2:00 p.m. for the following purposes:
1. To elect two directors to serve a three-year term; and
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 4, 2000 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
Thora B. Thoroddsen
SECRETARY
Irvine, California
April 21, 2000
<PAGE>
[LOGO]
2450 WHITE ROAD 2(ND) FLOOR
IRVINE, CALIFORNIA 92614
(949) 797-0200
------------------------
PROXY STATEMENT
------------------------
GENERAL
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 2:00 p.m. on May 22, 2000, at the
Radisson Plaza Hotel Minneapolis, 35 South 7(th) Street, Minneapolis, Minnesota
55402, 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 28, 2000. 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 of the Company 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 4,
2000 will be entitled to vote at the Annual Meeting. On April 4, 2000, there
were 15,080,042 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 nominees set forth in this Proxy Statement.
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 his or her proxy and vote his or her
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. The authorized number of directors is currently four. The
Board of Directors is divided into three classes, with the terms of each class
ending in successive years. Edwin H. Lewis resigned as President, Chief
Executive Officer and a director of the Company effective as of March 28, 2000.
Prior to his resignation, Mr. Lewis was a Class I Director. On April 20, 2000,
William R. Halford was appointed as a Class II director. Robert Martini and
Mr. Halford are nominees for election at the Annual Meeting, both for a term of
three years, expiring at the third succeeding Annual Meeting (I.E., in the year
2003).
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>
NOMINEES FOR RE-ELECTION WITH A TERM OF OFFICE TO EXPIRE IN THREE YEARS (CLASS II DIRECTORS)
ROBERT MARTINI Mr. Martini was appointed as a director of the Company in October 1996 68
and has served on the Compensation Committee of the Board of Directors
since November 1996 and the Audit Committee of the Board of Directors
since November 1998. 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.
WILLIAM R. HALFORD Mr. Halford was appointed as a director of the Company on April 20, 40
2000. Since July 1996, Mr. Halford has served as President of the Irvine
Office Company, a division of The Irvine Company, which develops, leases
and operates a seven million square foot office portfolio. From August
1995 to June 1996, Mr. Halford served as Vice President General Manager
of The Irvine Company. Before joining the Irvine Company, Mr. Halford
was Vice President of Leasing and Marketing for PM Realty Group's
Western Division from January 1994 to July 1995.
DIRECTOR WHOSE TERM OF OFFICE EXPIRES IN TWO YEARS (CLASS I DIRECTOR)
MOSSIMO G. GIANNULLI Mr. Giannulli founded the Company's business in 1987 and has been 36
Chairman of the Board since the Company's formation in 1988. 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. Mr. Giannulli was appointed as President and
Chief Executive Officer of the Company on March 28, 2000.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
- --------------------------------- ------------------------------------------------------------------------ ---------
DIRECTOR WHOSE TERM OF OFFICE EXPIRES IN ONE YEAR (CLASS III DIRECTOR)
<S> <C> <C>
JOHN H. STAFFORD Mr. Stafford was appointed as a director of the Company in October 1996 79
and has served on the Audit Committee of the Board of Directors since
November 1996 and the Compensation Committee of the Board of Directors
since November 1998. 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 director of Virco Mfg. Corporation.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 1999. The Board of
Directors has a standing Audit Committee and Compensation Committee.
The Audit Committee is currently comprised of Robert Martini and John H.
Stafford. The Audit Committee 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 once in 1999.
The Compensation Committee is currently comprised of Robert Martini and John
H. Stafford. The Compensation Committee 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 and the Employee Stock Purchase Plan. The Compensation Committee met
three times and took action by written consent five times in 1999.
From December 1, 1998 to March 28, 2000, the Board of Directors had a
Nominating Committee comprised of Mossimo Giannulli and Edwin H. Lewis. Upon
Mr. Lewis' resignation on March 28, 2000, the Nominating Committee was
discontinued. The Nominating Committee met once in fiscal 1999.
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 options for 30,000 shares
upon initial appointment or election to the Board and receives an annual grant
of options 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% 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.
The options granted to Messrs. Martini and Stafford upon their initial
election or appointment to the Board (which had an exercise price of $25.375)
were canceled on May 18, 1999. In consideration for the cancellation of these
options, Messrs. Martini and Stafford were each granted options on May 18, 1999
to purchase 25,000 shares of the Company's Common Stock at an exercise price
equal to $8.8125, the fair market value of the Company's Common Stock on the
date of grant. Messrs. Martini and Stafford were each granted options on
May 20, 1999 to purchase 3,000 shares of the Company's Common Stock at an
exercise price equal to $8.4375, the fair market value of the Company's Common
Stock on the date of grant, pursuant to the Directors Plan. Mr. Halford was
granted options on April 20, 2000 to purchase
3
<PAGE>
30,000 shares of the Company's Common Stock at an exercise price equal to
$1.875, the fair market value of the Company's Common Stock on the date of
grant, 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>
Robert Martini Third succeeding Annual Meeting
William R. Halford Third succeeding Annual Meeting
</TABLE>
Messrs. Martini and Halford are currently 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 April 4, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- ----------- ---------------------------------------------------
<S> <C> <C>
Mossimo G. Giannulli.............. 36 Chairman of the Board, President and Chief
Executive Officer
Gia Castrogiovanni................ 40 Senior Vice President of Mossimo, Inc.
Thora B. Thoroddsen............... 37 Senior Vice President of Operations, Secretary and
Treasurer
Jody L. Love...................... 27 Vice President of Finance
</TABLE>
Background information on Mr. Giannulli is set forth under "Directors"
above.
Ms. Castrogiovanni joined the Company in December 1998 as Senior Vice
President of Mossimo, Inc. From 1995 to December 1998, Ms. Castrogiovanni was
Senior Vice President of Sales of Tommy Hilfiger Womenswear. From 1993 to 1995,
Ms. Castrogiovanni was Vice President of Sales of Dana Buckman, a clothing
manufacturer.
Ms. Thoroddsen has served as Senior Vice President of Operations of the
Company since July 1999 and as Secretary and Treasurer since March 1998.
Ms. Thoroddsen served as Senior Vice President of Finance of the Company from
January 1999 to July 1999 and as Controller from June 1997 to January 1999. From
January 1993 until joining the Company, Ms. Thoroddsen worked for Coldwell
Banker Relocation Services, most recently as Manager of Financial Reporting.
Ms. Love has served as Vice President of Finance of the Company since
July 1999. Ms. Love joined the Company in June 1999 and served initially as
Controller. From October 1994 until joining the Company, Ms. Love worked for
Arthur Andersen, LLP where she was an audit manager.
4
<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) each Chief Executive
Officer of the Company during 1999, (ii) each of the four most highly
compensated executive officers who were serving as executive officers as of
December 31, 1999 and whose annual salary and bonus exceeded $100,000 and
(iii) up to two other executive officers who would have qualified under
clause (ii) but for the fact that such person was not serving as an executive
officer of the Company as of December 31, 1999 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------ OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#) COMPENSATION ($)(1)
- --------------------------------- ---- ---------- --------- ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Edwin H. Lewis................... 1999 0 0 0 0 0
Former President/CEO(2) 1998 0 0 0 6,186,111 0
Gia Castrogiovanni............... 1999 200,000 0 0 0 0
Senior VP of Missimo, Inc.
Gerald Robertson................. 1999 250,000 0 0 0 0
Former Senior VP of Design(3)
Carole Hauer..................... 1999 200,000 0 0 0 1,250
Former Senior VP of Production(4)
Laura Landis..................... 1999 150,000 0 0 0 1,580
Former VP of Merchandising(5)
Thora B. Thoroddsen.............. 1999 110,000 0 0 0 650
Senior VP of Operations,
Secretary and Treasurer
</TABLE>
- ------------------------
(1) Represents Company contributions to the accounts of the specified executive
officers under the Company's 401(k) Plan.
(2) On November 30, 1998, in connection with Mr. Lewis' appointment as President
and Chief Executive Officer of the Company, the Company granted to
Mr. Lewis stock options to purchase up to 6,186,111 shares of the Company's
Common Stock. Mr. Lewis was not paid a salary in 1999 or 1998. On March 28,
2000, Mr. Lewis resigned as President, Chief Executive Officer and director
of the Company. In connection with his resignation, all stock options held
by Mr. Lewis were canceled.
(3) Mr. Robertson was relieved of his duties as Senior Vice President of Design
on or about March 28, 2000.
(4) Ms. Hauer ceased to be an employee of the Company on or about March 24,
2000.
(5) Ms. Landis ceased to be an employee of the Company on or about October 1,
1999.
5
<PAGE>
OPTION GRANTS AND OPTION VALUES
No stock options or stock appreciation rights were granted to any Named
Executive Officers during the year ended December 31, 1999.
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers and exercisable and
unexercisable options held by the Named Executive Officers as of December 31,
1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END AT FISCAL YEAR END(2)
ACQUIRED ON VALUE ------------------------- ----------------------------
EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edwin H. Lewis(3)............ 0 $ 0 5,436,111 750,000 $ 27,520,312 $ 3,796,875
Gia Castrogiovanni........... 0 0 62,500 187,500 316,406 949,219
Gerald Robertson(4).......... 0 0 62,500 187,500 316,406 949,219
Carole Hauer(4).............. 0 0 50,000 150,000 253,125 759,375
Laura Landis................. 11,000 32,163 0 0 0 0
Thora B.Thoroddsen........... 0 0 11,590 29,750 44,813 134,438
</TABLE>
- ------------------------
(1) Determined by calculating the spread between the market value of the Common
Stock on the date of exercise and the exercise price of the options.
(2) Based on the closing sales price of the Common Stock ($8.0625) on the New
York Stock Exchange on December 31, 1999, minus the exercise price of the
option, multiplied by the number of shares to which the option relates.
(3) On March 28, 2000, Mr. Lewis resigned as President, Chief Executive Officer
and director of the Company. In connection with his resignation, all stock
options held by Mr. Lewis were canceled.
(4) Effective April 11, 2000, all options held by Mr. Robertson and Ms. Hauer
became fully vested due to an acceleration of the vesting of such options,
subject to certain terms and conditions. The exercise price of such options
was above the closing sales price of the Common Stock on the New York Stock
Exchange on April 11, 2000.
EXECUTIVE EMPLOYMENT, INCLUDING SEPARATION, AGREEMENTS
Ms. Landis entered into an employment agreement with the Company with a term
of two years in May 1998. Under the employment agreement, if Ms. Landis'
employment were terminated without cause during the first fifteen months of the
agreement, the Company would be required to provide Ms. Landis compensation
amounting to the difference between her rate of compensation at the time of
termination and her rate of compensation with a new employer for a period of up
to nine months or for the balance of the term of the agreement, whichever is
less. In January 1999, Ms. Landis' title was changed from Vice President of
Production and Merchandising to Vice President of Merchandising as her
production responsibilities were transferred to Ms. Hauer. Pursuant to her
employment agreement, Ms. Landis received an annual base salary of $215,000,
subject to annual increases or reductions at the Company's discretion based upon
her annual performance appraisal. On or about October 1, 1999, Ms. Landis ceased
to be an employee of the Company.
6
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert Martini and John H. Stafford were the members of the Compensation
Committee of the Board of Directors during 1999. Neither Mr. Martini nor
Mr. Stafford is an employee of, or otherwise affiliated with (other than in
their capacity as director), the Company.
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, executive officers and other key
officers was determined for the calendar year ended December 31, 1999.
Robert Martini and John H. Stafford were the members of the Committee during
1999. Neither Mr. Martini nor Mr. Stafford is an employee of or otherwise
affiliated with (other than in their capacity as director), the Company. The
Committee's responsibilities were to review and determine the compensation paid
to corporate officers and key executives and administer the Company's 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 (the "IRC"),
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." In general, for
compensation to be performance based, it must meet certain criteria, including
being based on predetermined objective standards approved by stockholders. The
Committee intends generally 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. The Company's 1998 Employee Bonus Plan
(described below) has not been approved by the Company's stockholders and thus
payments under the 1998 Employee Bonus Plan do not qualify as "performance
based" compensation for purposes of IRC Section 162(m).
EXECUTIVE COMPENSATION COMPONENTS
The following is a discussion of the principal components of the executive
compensation program for fiscal 1999, each of which is intended to serve the
Company's overall compensation philosophy.
7
<PAGE>
BASE SALARY. Executives 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, annual performance reviews and the
financial performance of the Company. In August 1998, the Company adopted the
Mossimo, Inc. 1998 Employee Bonus Plan (the "Bonus Plan"). All full time,
regular employees of the Company are eligible to participate in the Bonus Plan
other than those employees who receive commissions or who participate in a
department bonus plan. Annual bonuses under the Bonus Plan are calculated based
on a percentage of an employee's base salary, which percentage varies depending
on the level of the employee. The maximum bonus under the Bonus Plan for an
executive of the Company is 30% of base salary. Bonuses for a given employee
under the Bonus Plan are determined on the basis of three components: (i) the
Company's performance based on earnings before interest, taxes, depreciation and
amortization, which represents 60% of an employee's potential bonus; (ii) the
performance of the employee's department based on preset criteria, which
represents 30% of an employee's potential bonus; and (iii) the employee's annual
evaluation, which represents 10% of the employee's potential bonus. Bonus awards
under the Bonus Plan are paid in a combination of cash and stock options. No
bonuses under the Bonus Plan will be awarded for 1999.
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.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Edwin Lewis, who served as the
Chief Executive Officer of the Company from December 1, 1998 to March 28, 2000,
received no base salary. On November 30, 1998, the Company granted Mr. Lewis
stock options to purchase up to 6,186,111 shares of Common Stock of the Company.
Pursuant to a contribution agreement described below in "Certain Transactions,"
Mr. Giannulli agreed to contribute to the Company a number of shares equal to
the number of shares issued by the Company to Mr. Lewis pursuant to his exercise
of these stock options. Effective March 28, 2000, Mr. Lewis resigned from his
position as Chief Executive Officer, and all stock options granted to Mr. Lewis
were canceled, the contribution agreement was terminated and Mr. Giannulli was
appointed as Chief Executive Officer of the Company. Mr. Giannulli received no
base salary during 1999 and the first quarter of 2000. Mr. Giannulli's
compensation for the remainder of 2000 and beyond is currently being negotiated.
Robert Martini
John H. Stafford
Dated: April 20, 2000
8
<PAGE>
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
Exchange Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates the same by reference.
CERTAIN TRANSACTIONS
In October 1998, the Company entered into a lease agreement for a facility
in Santa Monica, California with 3002 Pennsylvania Avenue, LLC, of which
Mr. Giannulli is a partner. The Company intended to open a design studio in the
facility, however, due to management changes within the Company, these plans
were terminated. During 1999, the Company entered into a sublease agreement with
a third party. The lease and sublease agreements have concurrent termination
dates. The Company's annual rent obligation under the lease for the facility is
approximately $77,000, and the current sublease agreement provides for annual
payments of approximately $99,000 to the Company.
On November 30, 1998, in connection with the grant by the Company to Edwin
H. Lewis of stock options to purchase up to 6,186,111 shares of Common Stock of
the Company (the "Lewis Options"), the Company and Mossimo Giannulli entered
into a Contribution Agreement (the "Contribution Agreement"), pursuant to which
Mr. Giannulli agreed to contribute to the Company a number of shares of Common
Stock equal to the aggregate number of shares of Common Stock to be issued by
the Company upon Mr. Lewis' exercise of the Lewis Options.
On November 30, 1998, in connection with the transactions associated with
the appointment of Edwin H. Lewis as President, Chief Executive Officer and
Director of the Company, the Company entered into a Stockholders Agreement (the
"Stockholders Agreement") with Mr. Lewis and Mossimo Giannulli. The Stockholders
Agreement provided for (i) the right of Mr. Giannulli and Mr. Lewis to
unilaterally nominate one member of the Company's Board of Directors and to
jointly nominate the remaining members of the Company's Board of Directors,
subject to certain exceptions, (ii) voting arrangements between Mr. Giannulli
and Mr. Lewis the intent of which was to equalize their voting power, except to
the extent that either one of them transfers his shares to a third party, and to
ensure that each of them voted for each other's director nominees and
(iii) certain restrictions on Mr. Giannulli and Mr. Lewis seeking to gain
control of the Company or transferring their shares to a third party.
In connection with Mr. Lewis' resignation as an officer and director of the
Company on March 28, 2000, Mr. Giannulli, the Company and Mr. Lewis entered into
a Separation and Release Agreement dated as of March 28, 2000 (the "Separation
and Release Agreement"), pursuant to which the Stockholders Agreement and the
Contribution Agreement were terminated. Concurrently with entering into the
Separation and Release Agreement, Mr. Lewis, the Company and Mr. Giannulli
entered into a Stock Option Termination Agreement pursuant to which the
Mossimo, Inc. Stock Option Plan for Edwin Lewis was terminated and the Lewis
Options were canceled.
On November 30, 1998, in connection with the transactions associated with
the appointment of Edwin H. Lewis as President, Chief Executive Officer and
Director of the Company, the Company entered into a Registration Rights
Agreement (the "Registration Rights Agreement") with Mossimo Giannulli and
Mr. Lewis. Pursuant to the Registration Rights Agreement, the Company granted
each of Mr. Giannulli and Mr. Lewis limited demand registration rights to
facilitate the resale of certain securities owned by them and certain piggyback
rights to sell their securities in connection with certain offerings of
securities of the Company. Due to the cancellation of the Lewis Options,
Mr. Lewis' rights under the Registration Rights Agreement have terminated.
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
9
<PAGE>
(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 ending
December 31, 1999, 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 Company's 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>
YEAR ENDING MOSSIMO, INC. TEXTILES (APPAREL) 500 S&P 500 INDEX
<S> <C> <C> <C>
TOTAL SHAREHOLDER RETURNS
2/23/96 $100 $100 $100
12/31/96 $69 $127 $112
12/31/97 $20 $136 $147
12/31/98 $56 $115 $187
12/31/99 $45 $85 $223
</TABLE>
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 4, 2000, 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>
TOTAL NUMBER OF
SHARES
BENEFICIALLY PERCENT OF SHARES
NAME OWNED OF COMMON STOCK
- -------------------------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
Mossimo G. Giannulli...................................................... 10,372,222 68.8%
Edwin H. Lewis............................................................ 0 *
Gia Castrogiovanni........................................................ 62,500(1) *
Gerald Robertson.......................................................... 250,000(2) 1.6%
Carole Hauer.............................................................. 200,000(3) 1.3%
Laura Landis.............................................................. 0 *
Thora B. Thoroddsen....................................................... 13,590(4) *
William R. Halford........................................................ 0 *
Robert Martini............................................................ 67,000(5) *
John H. Stafford.......................................................... 38,000(6) *
All directors and executive officers as a group (11 persons).............. 11,008,312 70.2%
</TABLE>
- ------------------------
* Less than one percent.
(1) Represents 62,500 shares of Common Stock underlying options exercisable
within sixty days of April 4, 2000.
(2) Represents 250,000 shares of Common Stock underlying options exercisable
within sixty days of April 4, 2000.
(3) Represents 200,000 shares of Common Stock underlying options exercisable
within sixty days of April 4, 2000.
(4) Represents 13,590 shares of Common Stock underlying options exercisable
within sixty days of April 4, 2000.
(5) Includes 34,000 shares of Common Stock underlying options exercisable within
sixty days of April 4, 2000.
(6) Includes 34,000 shares of Common Stock underlying options exercisable within
sixty days of April 4, 2000.
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 directors, executive
officers and beneficial owners of greater than 10% of the Company's Common Stock
complied with all Section 16(a) filing requirements applicable to them with
respect to transactions during the fiscal year ended December 31, 1999, except
that a Form 4 for Ms. Landis for three transactions and the Form 3 for Ms. Love
were filed late. Additionally, the Company knows that a Form 4 for
Ms. Thoroddsen for one exempt transaction in 1998 was filed late.
11
<PAGE>
APPOINTMENT OF INDEPENDENT AUDITORS
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, LLP 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.
Arthur Andersen, LLP was the independent public accountant for the Company
for the year ended December 31, 1999. Representatives of Arthur Andersen, LLP
are not expected to be present at the Annual Meeting. Currently, due to a recent
restructuring of the Company's business, the Company has not selected its
independent public accountants for the year ending December 31, 2000.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Pursuant to the Company's Bylaws, no business proposal will be considered
properly brought before the 2001 Annual Meeting by a stockholder, and no
nomination for the election of directors will be considered properly made at the
2001 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 2001
Annual Meeting is expected to be on or about May 21, 2001.
Thus, any stockholder intending to submit to the Company a proposal for
inclusion in the Company's Proxy Statement and proxy for the 2001 Annual Meeting
must submit such proposal so that it is received by the Company no earlier than
February 20, 2001 and no later than March 22, 2001. 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, 1999, which
includes the Company's 1999 annual report on Form 10-K (without exhibits) as
filed with the Securities and Exchange Commission, was previously mailed to
stockholders of record as of April 4, 2000 on or about April 28, 2000.
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
Thora B. Thoroddsen
SECRETARY
Irvine, California
April 21, 2000
12
<PAGE>
- --------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MOSSIMO, INC.
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Mossimo Giannulli, with unlimited power
of substitution, as Proxy to represent the undersigned at the Annual Meeting
of Stockholders of Mossimo, Inc., to be held on Monday, May 22, 2000, at the
Radisson Plaza Hotel Minneapolis, 35 South 7th Street, Minneapolis, Minnesota
55402, at 2:00 p.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
your votes as /X/
indicated in
this example
<TABLE>
<S> <C>
ITEM 1. Election of Robert Martini and FOR WITHHELD ITEM 2. In their discretion, the Proxy is authorized to vote upon
William R Halford to the Board of / / / / such other business as may properly come before the meeting.
Directors for a three year term.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
[Instruction: To Withhold Authority to vote DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
or one nominee, draw a line through (or MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEE FOR DIRECTOR AND AS
otherwise strike out) the nominee's name SUCH PROXY DEEMS ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY
in the list above] COME BEFORE THE MEETING.
</TABLE>
<TABLE>
<S> <C>
YES NO
1. Do you plan to attend the Annual Meeting / / / /
of Stockholders on May 22, 2000 at 2:00 p.m.?
2. Has your address changed? If so, please provide the new
address below.
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
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.
</TABLE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
