<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
Morrow Snowboards, 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(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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Notes:
<PAGE>
[MORROW SNOWBOARDS, INC. LOGO APPEARS HERE]
MORROW SNOWBOARDS, INC.
May 25, 1998
Dear Shareholder:
On behalf of the Board of Directors, it is my pleasure to extend to you an
invitation to attend the 1998 Annual Meeting of Shareholders of Morrow
Snowboards, Inc. (the "Annual Meeting"). We hope you can join us. The Annual
Meeting will be held at:
Place: Multnomah Athletic Club
1849 SW Salmon Street
Portland, OR 97205
Date: Wednesday, June 24, 1998
Time: 10:00 a.m.
The Notice of the Annual Meeting, Proxy Statement and Annual Report
accompany this letter. Due to printing deadlines, the Annual Report contains a
letter to shareholders which was prepared by the former Chief Executive
Officer of the Company. The Proxy Statement describes the business to be
transacted at the meeting and provides other information concerning the
Company. The principal business to be transacted at the Annual Meeting will be
the (i) election of directors and (ii) ratification of the selection of Arthur
Andersen, LLP as the Company's independent auditors for 1998.
After careful consideration, the Board of Directors unanimously recommends
that shareholders vote FOR the election of the nominated directors and for the
ratification of Arthur Andersen, LLP as the Company's independent auditors.
We know that many of our shareholders will be unable to attend the Annual
Meeting. Proxies are therefore solicited so that each shareholder has an
opportunity to vote on all matters that are scheduled to come before the
meeting. Whether or not you plan to attend the Annual Meeting, we hope that
you will have your stock represented by marking, signing, dating and returning
your proxy card in the enclosed envelope as soon as possible. Your stock will
be voted in accordance with the instructions you have given in your proxy
card. You may, of course, attend the Annual Meeting and vote in person even if
you have previously returned your proxy card.
Sincerely,
/s/ Victor G. Petroff
Victor G. Petroff
Chairman of the Board
IMPORTANT
A proxy card is enclosed herewith. All shareholders are urged to complete
and mail the proxy card promptly. The enclosed envelope for return of the
proxy card requires no postage. Any shareholder attending the Annual
Meeting may personally vote on all matters that are considered, in which
event the signed proxy will be revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED
[LOGO]
PO Box 12606 Salem, OR USA 97309 Phone. 503.375.9300 Fax. 503.315.1199
<PAGE>
MORROW SNOWBOARDS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 24, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Morrow
Snowboards, Inc., an Oregon corporation (the "Company"), will be held at the
Multnomah Athletic Club, 1849 S.W. Salmon Street, Portland, Oregon 97205 at
10:00 a.m. local time, on Wednesday, June 24, 1998 (the "Annual Meeting") for
the following purposes:
1. To elect six (6) directors to the Company's Board of Directors.
2. To ratify the selection of Arthur Andersen, LLP as the Company's
independent auditors for the fiscal year ending December 26, 1998.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The nominees for election as directors are named in the enclosed Proxy
Statement.
The record date for the Annual Meeting is May 19, 1998. Only shareholders of
record at the close of business on that date will be entitled to notice, and
to vote at, the Annual Meeting or any adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM MAY
BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT
LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE
ANNUAL MEETING.
By Order of the Board of Directors
/s/ P. Blair Mullin
P. Blair Mullin
President, Chief Financial Officer,
Treasurer and Secretary
Salem, Oregon
May 25, 1998
<PAGE>
MORROW SNOWBOARDS, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 24, 1998
GENERAL
This Proxy Statement is furnished by the Board of Directors of Morrow
Snowboards, Inc., an Oregon corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors for use at the Company's
1998 Annual Meeting of Shareholders (the "Annual Meeting"), to be held at
10:00 a.m. local time, on Wednesday, June 24, 1998 at the Multnomah Athletic
Club, 1849 S.W. Salmon Street, Portland, Oregon 97205. The principal executive
offices of the Company are located at 2600 Pringle Road, S.E., Salem, Oregon
97302.
This Proxy Statement and the enclosed proxy card are first being mailed to
the Company's shareholders on or about May 25, 1998.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of the Company's common stock, no par value (the
"Common Stock"), at the close of business on May 19, 1998, will be entitled to
vote at the Annual Meeting. On that date, the Company had approximately
6,176,556 shares of Common Stock outstanding.
QUORUM AND VOTING
Each share of Common Stock entitles the holder thereof to one vote. Under
Oregon law, action may be taken on a matter submitted to shareholders only if
a quorum exists with respect to that matter. A majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting, present in
person or represented by proxy, will constitute a quorum for the Annual
Meeting.
Holders of shares of the Common Stock are not entitled to cumulative voting
rights in the election of directors. A nominee for election to the Board of
Directors will be elected by a plurality of the votes cast by the shares
entitled to vote at the Annual Meeting. In the election of directors, any
action other than a vote for a nominee will have the practical effect of
voting against the nominee. For all other matters, action is approved if the
votes cast in favor of the action exceed the votes cast opposing the action.
Abstentions and other nonvotes are counted for purposes of determining whether
a quorum exists at the Annual Meeting, but are not counted for any purpose in
determining whether a proposal is approved and have no effect on determining
whether a plurality exists with respect to a given nominee. Proxies and
ballots will be received and tabulated by American Securities Transfer &
Trust, Inc.
REVOCABILITY OF PROXIES
A proxy delivered pursuant to this solicitation is revocable at the option
of the person giving the same at any time before it is exercised. A proxy may
be revoked, prior to its exercise, by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy card bearing a
later date, or by attending the Annual Meeting and electing to vote in person.
Attendance at the Annual Meeting, in and of itself, will not constitute a
revocation of a proxy. If no directions are specified, the shares will be
voted "FOR" (i) the election of the directors recommended by the Board of
Directors, (ii) the ratification of the selection by the Board of Directors of
the Company's independent auditors and (iii) in accordance with the discretion
of the named proxies, on other matters properly brought before the Annual
Meeting.
1
<PAGE>
SOLICITATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors, and the entire cost of preparing, printing and mailing this Proxy
Statement and the proxy solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by directors,
officers and other employees of the Company, without additional remuneration,
in person or by telephone or facsimile transmission. The Company will also
request brokerage firms, bank nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of the Common Stock as of the record
date and will provide reimbursement for the cost of forwarding the proxy
materials in accordance with customary practice. Your cooperation in promptly
completing, signing, dating and returning the enclosed proxy card will help
avoid additional expense.
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
ELECTION OF DIRECTORS
The Board of Directors consists of six (6) members. The nominees for
election (the "Nominees") are Messrs. Bickert, Eide, Krieger, Morrow, Petroff
and Zaccaro, each of whom is currently serving as a director. Each of the
Nominees, if elected, will serve as director of the Company until the next
Annual Meeting following his election or until his successor is elected and
qualified, subject to earlier termination by death, disability, resignation or
removal.
Shares eligible to be voted, for which a properly dated and executed proxy
is received by the Secretary of the Company prior to the Annual Meeting, will
be voted in accordance with any choice specified. Where no choice is
specified, eligible shares will be voted for each Nominee as director. If a
Nominee for director becomes unavailable for any reason (which is not now
anticipated), the proxies will vote those shares for a substitute Nominee
approved by the Board of Directors.
INFORMATION ABOUT THE DIRECTOR NOMINEES
Maurice C. Bickert (age 75) has served as a director of the Company since
February 1996. Mr. Bickert served as President and Chief Executive Officer of
Marquis Corp. from August 1985 to December 1993. From 1955 to 1985, Mr.
Bickert had over 30 years management experience with ITT Corporation and spent
his last 12 years with ITT doing merger and acquisition, licensing and
turnaround work.
Gregory M. Eide (age 43) has served as a director of the Company since June
1993. Mr. Eide is a co-founder and partner of Harris & Eide, a certified
public accounting firm in Salem, Oregon, founded in 1983. Mr. Eide is also
President of Thomas Kay Textiles, Inc., a national retailer of floor coverings
based in Salem, Oregon, and Secretary and Treasurer of Cascade Pacific
Development, Inc., a real estate developer.
Erik J. Krieger (age 38) has served as a director of the Company since April
1994. Since 1989, Mr. Krieger has held various management positions with
Pacific Crest Securities, Inc. ("Pacific Crest"), an investment banking firm.
He has been Chairman and Chief Executive of Pacific Crest since January 1997,
and was Executive Managing Director from February to December 1996 and a
Managing Director prior thereto. Mr. Krieger currently serves as a director of
Molded Container Corporation, an injection plastics manufacturer and Applied
Research, Inc., a specialty chemical manufacturing company, and as a general
partner of Diversified Opportunities Group, a private investment partnership.
Ray E. Morrow, Jr. (age 53) has served as a director of the Company since
the Company's inception in October 1989. Mr. Morrow served as Chairman of the
Board of the Company from June 1990 until January 1998 and as Chief Executive
Officer of the Company from the Company's inception until May 1995. From
January 1995 to April 1995, he served as President of the Company. In August
1996, Mr. Morrow founded Morrow Aircraft Corporation, a proposed manufacturer
of aircraft incorporating composite materials technology, and has served as a
director and Chairman of the Board of Directors since that company's
inception. In March 1982,
2
<PAGE>
Mr. Morrow founded II Morrow, Inc., served as its Chairman of the Board and
Chief Executive Officer until its acquisition by United Parcel Service ("UPS")
in 1986, and continued as Chief Executive Officer until 1987. Mr. Morrow was a
founder and currently serves as a director of American Blimp Corporation, a
manufacturer of airships used worldwide for advertising and surveillance. Mr.
Morrow was a director of Lightship America, Inc., which leased airships for
commercial advertising purposes and was acquired by American Blimp Corporation
in December 1996.
Victor G. Petroff (age 43) has served as a director of the Company since
July 1996 and Chairman of the Board of the Company since May 18, 1998. Mr.
Petroff currently serves as General Manager of Precision Interconnect, a
division of AMP, Inc. Mr. Petroff joined Precision Interconnect, a leading
manufacturer of high-performance electronic cable assemblies, in 1990. Prior
to joining Precision Interconnect in 1990, Mr. Petroff held executive and
operating management positions with several companies in the manufacturing and
financial services industries. Since 1991, Mr. Petroff has been a director of
Modo, Inc., (formerly Agio Designs, Inc.), a company designing and
manufacturing OEM industrial furniture and technology carts for engineering,
scientific and medical uses.
James V. Zaccaro (age 55) has served as a director of the Company since May
1991. Mr. Zaccaro currently serves as Chairman of the Board of American Blimp
Corporation. He served as a director of Lightship America, Inc. prior to its
acquisition by American Blimp Corporation in December 1996. Mr. Zaccaro has
more than 20 years of management experience with UPS, where he managed
districts in Texas, Illinois and Arizona. In 1986, Mr. Zaccaro helped
establish UPS Corporate Strategic Planning Group. After leaving UPS in 1988,
he founded Encore Sports Company, a distributor of golf equipment and
supplies. In 1986, Mr. Zaccaro co-founded Viva Properties, an international
vacation property developer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
COMPENSATION OF DIRECTORS
During 1997, nonmanagement directors received $1,000 per month for serving
as directors, together with reimbursement for reasonable travel and related
expenses incurred in attending Board and Management Committee meetings.
Beginning in January 1998, the monthly payment was reduced from $1,000 to
$750. Under the Company's Stock Option Plan for Non-Employee Directors, each
nonemployee director, upon joining the Board, and following his or her
election or reelection at each annual meeting of shareholders, receives an
option to purchase 2,450 shares of Common Stock of the Company.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Board of Directors has established an Audit Committee and a Compensation
Committee.
The Audit Committee oversees actions taken by the Company's independent
auditors. The Audit Committee consists of Gregory M. Eide, Erik J. Krieger and
Maurice C. Bickert. The Audit Committee held two (2) meetings in fiscal 1997.
The Compensation Committee reviews the compensation of the Company's
executive officers and makes recommendations to the Board of Directors
regarding compensation. The Compensation Committee consists of Gregory M.
Eide, James V. Zaccaro and Maurice C. Bickert. The Compensation Committee held
seven (7) meetings in fiscal 1997.
The Board of Directors held fifteen (15) meetings during fiscal 1997. Each
incumbent director serving on the Board of Directors during 1997 was present
for more than 75 percent of the aggregate number of (i) all meetings of the
Board of Directors held during the year while he was a director and (ii) all
meetings of committees on which he served.
3
<PAGE>
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
P. Blair Mullin.................. 44 President, Chief Financial Officer,
Treasurer and Secretary
Neil E. Morrow................... 28 Vice President, Boots and Bindings
and Assistant Secretary
James E. Morrow.................. 49 Vice President, Snowboard Operations
and Assistant Secretary
J. Scott Sibley.................. 43 Vice President, Global Sales
Georell Bracelin................. 37 Vice President, Marketing
Robert J. Morrow................. 28 Vice President, Advance Design, Hard
Goods and Assistant Secretary
</TABLE>
- --------
P. Blair Mullin was appointed President of the Company on May 18, 1998. Mr.
Mullin has served as Chief Financial Officer and Secretary of the Company
since the Company's acquisition of Westbeach Snowboard Canada Ltd.
("Westbeach") in November 1997, and has also served as Treasurer of the
Company since January 21, 1998. Mr. Mullin served as President and Chief
Executive Officer of Westbeach from July 1995 to November 1997. From 1992 to
1995, Mr. Mullin was a private business consultant. From 1988 to 1992,
Mr. Mullin served as Chief Financial Officer of Bradbury International
Equities Ltd., a holding company, and as General Manager of Padovano Foods,
Inc., a food processing company, from 1990 to 1992.
Neil E. Morrow, a founder of the Company, has served as Vice President,
Boots and Bindings since January 21, 1998 and as Assistant Secretary since
July 1995. He served as Vice President-Research and Development of the Company
from October 1989 to January 1998. Mr. Morrow served as the Company's
Treasurer from October 1989 to October 1994, and as Secretary from October
1989 to July 1995. Mr. Morrow is currently a director of Snowsports Industries
of America, a ski and snowboard trade association and Morrow Aircraft
Corporation.
James E. Morrow has served as Vice President, Snowboard Operations and
Assistant Secretary of the Company since January 21, 1998. He served as Vice
President-Operations of the Company from April 1995 to January 1998. From May
1993 to April 1995, Mr. Morrow served as Chief Operating Officer and a
Director of the Company. From February 1982 to April 1993, Mr. Morrow was the
Manager of the manufacturing division of II Morrow, Inc., a developer and
manufacturer of navigational devices and automated sorting/handling equipment
for the transportation industry.
J. Scott Sibley has served as Vice President, Global Sales of the Company
since January 21, 1998. Mr. Sibley was President of Westbeach from 1985 to
July 1995, and was Vice President, Sales from July 1995 to November 1997 and a
director of Westbeach from 1985 to May 1997.
Georell Bracelin has served as Vice President, Marketing of the Company
since January 21, 1998. She was Vice President, Senior Account Director at the
Ralston Group, an advertising agency based in Bend, Oregon, from November 1993
to December 1997 and prior thereto she worked with advertising agencies in
Portland, Oregon and Billings, Montana. She has received statewide and
regional "Addy" awards for client ads for clients in various industries.
Robert J. Morrow, a founder of the Company, has served as Vice President,
Advance Design, Hard Goods of the Company since January 21, 1998. He served as
Vice President-Advanced Design from April 1996 to January 1998. Mr. Morrow
served as Director-Research and Development from January 1995 until April 1996
and as President of the Company from the Company's inception until January
1995. Mr. Morrow has also served as a key member of Morrow's professional team
of riders since the Company's inception. Prior to founding the Company in
1989, Mr. Morrow was a professional team rider for Sims Snowboards, USA.
4
<PAGE>
FAMILY RELATIONSHIPS
Ray E. Morrow, Jr. is the father of Neil E. Morrow. Ray E. Morrow, Jr. and
James E. Morrow are brothers. Robert J. Morrow and Neil E. Morrow are cousins.
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth certain information regarding the
compensation paid in the last three fiscal years to Messrs. Calapp, Shelton
and Morrow, the former Chief Executive or Chief Operating Officers of the
Company, for services rendered in all capacities to the Company. No other
executive officer of the Company was paid compensation in excess of $100,000
during these periods. Mr. Calapp, the only person who served as Chief
Executive Officer or who received compensation in excess of $100,000 in fiscal
year 1997, is hereinafter referred to as the "Named Executive Officer."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------- ------------
SECURITIES
UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS OPTIONS(#) COMPENSATION
- --------------------------- ---- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David E. Calapp(1)............ 1997 $157,692 $ -- 50,000(2) $ --
Chairman of the Board, Chief 1996 46,154 35,000 50,000 13,857(3)
Executive Officer and 1995
President
Dennis R. Shelton(4).......... 1997
President and Chief 1996 $ 94,038 -- -- --
Operating Officer 1995 88,221 -- 61,250 --
Ray E. Morrow, Jr.(5)......... 1997
Chief Executive Officer 1996 $111,280 -- -- --
Chairman of the Board 1995 114,490 -- 73,500 --
</TABLE>
- --------
(1) David E. Calapp resigned as an officer and director of the Company
effective May 18, 1998. Mr. Calapp served as the Company's Chief Executive
Officer from August 20, 1996 and President from November 1996. Since
January 1998, he also served as Chairman of the Board.
(2) Replaced an option granted August 20, 1996 for 50,000 shares, which
option was cancelled.
(3) Represents reimbursement of moving expenses of $13,857.
(4) Dennis R. Shelton served as the Company's President and Chief Operating
Officer from May 1995 through November 1996.
(5) Ray E. Morrow, Jr. served as the Company's Chief Executive Officer from
October 1989 to May 1995 and the Chairman of the Board from June 1990 to
January 1998.
5
<PAGE>
GRANT OF STOCK OPTIONS
The following table sets forth certain information regarding options granted
to the Named Executive Officer during the fiscal year ended December 27, 1997.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSURED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------- ---------------------
NUMBER PERCENT OF
OF SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTION EMPLOYEES PRICE EXPIRATION
NAME GRANTS(#) IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David E. Calapp......... 20,000(1) 12.36% $ 8.50 2/18/2007 $ 58,000 $ 193,000
30,000(1) 18.54% $10.00 2/18/2007 $ 42,000 $ 245,000
------ ----- ---------- ----------
50,000 30.90% $ 100,000 $ 438,000
</TABLE>
- --------
(1)Replaced an option granted August 20, 1996 for 50,000 shares at an exercise
price of $11.62 per share, which 1996 option was cancelled.
EXERCISE OF STOCK OPTIONS AND YEAR-END VALUES
The following table sets forth certain information regarding options of the
Named Executive Officer outstanding at year-end.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND YEAR-END OPTION/WARRANT VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS AT OPTIONS/WARRANTS AT
DECEMBER 27, 1997 DECEMBER 27, 1998(1)
------------------------- -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David E. Calapp......... -0- $-0- 20,000 30,000 $-0- $-0-
</TABLE>
- --------
(1) Calculated based on the difference between the option exercise price and
closing price of the Common Stock on December 26, 1997 ($2.50 per share).
OPTION REPRICINGS
The following table sets forth certain information regarding the
cancellation and re-issuance of certain options held by executive officers of
the Company. The Compensation Committee of the Board of Directors believed the
decline in stock price from the exercise price of the original options
described below through the date of repricing was due to a number of factors,
including industry and market conditions. The Compensation Committee
determined that repricing the options to the prevailing market price would
provide a more effective incentive to the executive officers and was in the
best interests of the Company and its shareholders.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE
UNDERLYING STOCK AT PRICE AT NEW LENGTH OF
DATE OF OPTIONS TIME OF TIME OF EXERCISE ORIGINAL OPTION
NAME AND POSITION REPRICING REPRICED REPRICING REPRICING PRICE TERM REMAINING
----------------- --------- ---------- --------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David E. Calapp,
President and 2/18/97 20,000 $6.75 $11.62 $ 8.50 9 years, 6 months
Chief Executive
Officer(1)............. 2/18/97 30,000 $6.75 $11.62 $10.00 9 years, 6 months
Margaret A. Daniels,
Acting Chief
Financial Officer,
Treasurer and
Secretary(1)........... 2/18/97 1,000 $6.75 $11.12 $ 6.75 9 years, 2 months
</TABLE>
- --------
(1)No longer an executive officer of the Company.
6
<PAGE>
EMPLOYMENT CONTRACT
The Company's Employment Agreement with Ray E. Morrow, Jr. expired in
December 1996. Mr. Morrow is continuing as an at-will employee at a monthly
salary of $1,250 with such duties as assigned by the Chief Executive Officer.
Ray E. Morrow, Jr. also entered into a Noncompete Agreement with Nicollet
Partners on April 20, 1994, which agreement was assigned to the Company and
certain shareholders pursuant to that certain Assignment Agreement dated
December 19, 1995, pursuant to which Mr. Morrow agreed that during the period
of his employment with the Company and for two years following termination of
employment, he will not, directly or indirectly, be connected in any manner
with any business that competes with the Company, or divert any customer of
the Company or induce any employee or consultant of the Company to terminate
his or her relationship with the Company.
PERFORMANCE GRAPH
The following graph compares the cumulative total return to holders of the
Company's Common Stock with the cumulative total return of the Nasdaq US Stock
Market, the Standard & Poor's Small Cap Index and the Standard & Poor's
Consumer Index for the period beginning December 14, 1995, the first trading
day of the Common Stock, and ending March 31, 1998.
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
S&P
SMALL S&P
Measurement Period MORROW NASDAQ CAP CONSUMER
- --------------------- -------- ------- -------- --------
<S> <C> <C> <C> <C>
12/14/95 100 100 100 100
3/31/96 78.85 106.09 106.56 103.4
6/30/96 80.77 114.14 111.84 109.08
9/30/96 90.38 118.18 115.14 111.18
12/31/96 50.96 124.35 121.4 116.11
3/31/97 36.54 117.68 114.39 121.05
6/30/97 36.54 138.9 134.8 142.72
9/30/97 27.88 162.37 156.3 145.27
12/31/97 18.27 151.26 151.17 156.75
3/31/98 12.5 176.82 167.59 179.5
</TABLE>
Assumes $100 invested in Morrow Snowboards, Inc. Common Stock, the Nasdaq US
Stock Market, the Standard & Poor's Small Cap Index and the Standard & Poor's
Consumer Index, with all dividends reinvested. Stock price shown above for the
Common Stock is historical and not necessarily indicative of future price
performance.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The executive compensation policies and programs developed by the Company
are designed to retain and motivate executive officers and to ensure that
their interests are aligned with the interests of the Company's shareholders.
It is the Company's policy to offer competitive compensation opportunities for
its employees based on a combination of factors, including Company growth,
corporate performance and the individual's personal contribution to the
business.
7
<PAGE>
The Company's compensation programs are implemented by the Compensation
Committee of the Board of Directors and consist of base salary, annual
incentives and long-term incentives. The Company's Chief Executive Officer
(or, in the case of a vacancy in the Chief Executive Officer position, the
Company's President) recommends to the Compensation Committee annual salary
adjustments and incentive grants for the Company's executive officers, other
than himself. All members of the Board of Directors participate in the
deliberations concerning executive compensation. Executive officers who are
also directors do not participate in decisions affecting their own
compensation.
BASE SALARY
In reaching the determination concerning fiscal 1997 executive officer base
salaries, the Compensation Committee considered the recommendations of the
Chief Executive Officer. Among these factors, the Chief Executive Officer's
recommendations were based upon review of competitive compensation information
published by the National Executive Compensation Survey and information
provided by independent compensation consultants. In making the
recommendations, the Chief Executive Officer compared the Company to a
selected group of companies of similar size and business niche, specifically
the sporting goods retail market and manufacturing, and considered
compensation only for executives with similar job descriptions. Compensation
recommendations were targeted to fall at the mid-point of the comparative
group.
In addition to the Chief Executive Officer's recommendations, the
Compensation Committee considered its own assessment of the individual
performances of each of the executives and its own subjective assessment of
the Company's overall financial performance. There is no fixed relationship
between base salary and corporate performance or between base salary and the
competitive range of salaries that may be offered by competitive companies.
The Compensation Committee members considered their business judgment in light
of their experience to be an important factor in establishing executive
compensation.
ANNUAL INCENTIVES
On an annual basis, the Compensation Committee considers the grant of annual
incentive bonuses to each executive officer. Incentive bonuses are
discretionary and are determined subjectively, with the Compensation Committee
taking into consideration the individual's performance, contribution and
accomplishments during the past fiscal year and the Company's financial
performance. Neither the decision to award a bonus, nor the specific size of
the incentive bonus, is based on any specific measure of corporate
performance. In fiscal 1997, no incentive bonuses were awarded to any
executive officer.
STOCK INCENTIVE COMPENSATION
The Board of Directors believes that stock ownership by executive officers
and key employees provides valuable incentives for those persons to benefit as
the Company's Common Stock price increases, and that the stock option-based
incentive compensation arrangements help align the interests of executives,
employees and shareholders. To facilitate these objectives, the Board of
Directors has granted stock options to executives and key employees through
the Company's Employee Equity Incentive Plan (formerly, the 1990 Amended and
Restated Stock Option Plan) (the "Plan"), approved by the shareholders in
1991. The Plan was amended by the Board of Directors in 1995 to increase the
number of shares available under the Plan to 1,102,500, which amendment was
approved by the Company's shareholders. The Plan was again amended by the
Board of Directors in 1997 to change the name of the Plan, add certain
additional types of equity grants, provide for acceleration of vesting on
certain changes in control or sale of substantially all the Company's assets
and a number of immaterial changes to update, modernize and reorganize the
Plan, which amendment was also approved by the Company's shareholders.
8
<PAGE>
Pursuant to the Plan, in fiscal 1997, the following options to purchase the
Company's Common Stock were granted to executive officers under the Plan at a
price believed to equal or exceed the fair market value at the date of grant:
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OFFICER NO. OF SHARES PRICE DATE OF GRANT
------------------------- ------------- ------ -------------
<S> <C> <C> <C>
Martin P. Carrigan(1)..................... 5,000 $ 6.75 02/13/97
Anthony R. Penca(1)....................... 5,000 $ 6.75 02/13/97
David E. Calapp(1)(2)..................... 20,000 $ 8.50 02/18/97
David E. Calapp(1)(2)..................... 30,000 $10.00 02/18/97
P. Blair Mullin........................... 20,000 $ 2.88 11/12/97
J. Scott Sibley(3)........................ 10,000 $ 2.88 11/12/97
</TABLE>
- --------
(1) No longer an executive officer of the Company.
(2) Replaced an option granted August 20, 1996 for 50,000 shares at an
exercise price of $11.62 per share, which 1996 option was cancelled.
(3)The optionee was not an executive officer at the time such options were
granted.
In determining the number of options granted to executive officers and key
employees, the Board of Directors considered the person's opportunity to
affect the share price of the Company's Common Stock, the level of the
person's performance based on past performance, future contribution to the
Company and the anticipated incentive effect of the number of options granted.
The Board of Directors believes that the policies and plans described above
provide competitive levels of compensation and effectively link executives and
shareholder interests. Moreover, the Board of Directors believes such policies
and plans are consistent with the long-term investment objectives appropriate
to the business in which the Company is engaged.
Board of Directors
<TABLE>
<S> <C>
Maurice C. Bickert Ray E. Morrow, Jr.
Gregory M. Eide Victor G. Petroff
Erik J. Krieger James V. Zaccaro
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, directors and
persons who own 10% of the Common Stock to file with the Securities and
Exchange Commission (the "SEC") initial reports of beneficial ownership on
Form 3 and reports of changes in beneficial ownership of Common Stock and
other equity securities of the Company on Forms 4 and 5. Reporting persons are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports that they file. To the Company's knowledge, based solely
on review of copies of such reports furnished to the Company and written
representations from reporting persons, all Section 16(a) reports due during
or with respect to fiscal 1997 were filed on a timely basis, except those set
forth below.
Gregory M. Eide, a director of the Company, failed to timely file a Form 4
for December 1997 with respect to a reportable transaction. Certain other
officers and directors failed to timely file Form 5s for the 1997 fiscal year.
These Form 5s, as amended, reflect transactions not reported on a timely basis
by the following officers and/or directors: P. Blair Mullin (1 transaction);
Gregory M. Eide (1 transaction); Anthony R. Penca (1 transaction); James E.
Morrow (5 transactions); Victor G. Petroff (1 transaction); Erik J. Krieger
(1 transaction); David E. Calapp (2 transactions); James V. Zaccaro (1
transaction); Maurice C. Bickert (2 transactions); Ray E. Morrow, Jr. (7
transactions).
Late filing of the Form 5's for fiscal year 1997 can be attributed to
various circumstances including a change in the Company's fiscal year which
resulted in an earlier filing deadline. Together with the directors and
officers, the Company has taken action to implement routine procedures
designed to periodically remind its officers and directors of their Section
16(a) filing requirements to help ensure future compliance.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership, as of March 31, 1998 of the Common Stock by (i) each person known
by the Company to own beneficially more than 5% of the Common Stock, (ii) the
Named Executive Officer, (iii) each director and director nominee of the
Company and (iv) all directors and executive officers as a group. Except as
otherwise noted, the Company believes the persons listed below, based on
information furnished by those persons, have sole investment and voting power
with respect to the Common Stock owned by them. The mailing address of each of
the persons listed below is the Company's principal executive office.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED(1) PERCENT OF CLASS
---- ------------------- ----------------
<S> <C> <C>
James V. Zaccaro(2).................... 224,906 3.5
Ray E. Morrow, Jr.(3).................. 218,999 3.4
Erik J. Krieger(4)..................... 90,701 1.4
Gregory M. Eide(5)..................... 87,083 1.3
Maurice C. Bickert(6).................. 40,071 *
Victor G. Petroff(7)................... 10,900 *
All directors and executive officers as
a group (12 persons)(8)............... 1,246,795 19.3
</TABLE>
- --------
*Less than 1% of the shares outstanding.
(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person
has the right to acquire beneficial ownership of such security within 60
days, including, but not limited to, any right to acquire such security
through the exercise of any option or warrant or through the conversion of
a security. Any securities not outstanding that are subject to such
options or warrants shall be deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by
that person, but shall not be deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
(2) Includes 19,600 shares subject to options exercisable within 60 days after
March 31, 1998 and 9,800 shares issuable within 60 days after March 31,
1998, upon the exercise of warrants to purchase Common Stock. Excludes
116,499 shares beneficially owned by Anne M. Zaccaro, Mr. Zaccaro's wife,
and 50,946 shares beneficially owned by Jonathan D. Zaccaro, Mr. Zaccaro's
adult son who shares the same residence, of which shares Mr. Zaccaro
disclaims beneficial ownership.
(3) Includes 42,875 shares subject to options exercisable within 60 days after
March 31, 1998 and 24,500 shares issuable within 60 days after March 31,
1998, upon the exercise of a warrant to purchase Common Stock. Excludes an
aggregate 181,090 shares beneficially owned by Mr. Morrow's wife, Sharon
R. Morrow, of which shares Mr. Morrow disclaims beneficial ownership.
(4) Includes 16,615 shares owned through a 401(k) profit sharing plan, 7,350
shares subject to options exercisable within 60 days after March 31, 1998,
and 9,800 shares issuable within 60 days after March 31, 1998, upon the
exercise of a warrant to purchase Common Stock. Also includes 27,218
shares issued to Diversified Opportunities Group. By virtue of being a
general partner of Diversified Opportunities Group, Mr. Krieger may be
deemed to beneficially own the shares owned thereby.
(5) Includes 27,800 shares owned through a 401(k) profit sharing plan, 7,200
shares owned through an individual retirement account, 7,350 shares
subject to options exercisable within 60 days after March 31, 1998 and 980
shares issuable within 60 days after March 31, 1998, upon the exercise of
warrants to purchase Common Stock.
(6) Includes 7,350 shares subject to options exercisable within 60 days after
March 31, 1998.
10
<PAGE>
(7) Includes 4,900 shares subject to options exercisable within 60 days after
March 31, 1998.
(8) Includes 236,575 shares subject to options exercisable within 60 days
after March 31, 1998 and 45,080 shares issuable within 60 days after March
31, 1998, upon the exercise of warrants to purchase Common Stock. Excludes
126,062 shares beneficially owned and 31,250 shares subject to options
exercisable within 60 days after March 31, 1998 held by three persons who
were executive officers of the Company on March 31, 1998 but are no longer
executive officers on the date hereof.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1995, in connection with each exercising options for 61,250 shares
of Common Stock, Neil E. Morrow and Robert J. Morrow each executed a
promissory note in the principal amount of $55,000 in payment of the exercise
price for those shares (collectively, the "Option Notes"). Neil E. Morrow has
made principal payments in the amount of $16,250 to date. As a result, Neil
Morrow's original note was cancelled and he executed a new promissory note
with identical terms, except that the principal amount of the original note
was reduced to reflect his payment. The Option Notes bear interest at 10% per
annum, payable biweekly. The principal of and accrued interest on the Option
Notes were due and payable on August 1, 1997, which due date was extended to
August 1, 1998. The Option Notes are secured by the Common Stock received upon
exercise of the options.
In December 1996, the Company retained Pacific Crest Securities, Inc.
("Pacific Crest") to act as its investment banking representative regarding a
potential acquisition by the Company ("Acquisition Services Agreement"). In
March 1997, the Acquisition Services Agreement was modified to engage Pacific
Crest to act as the Company's exclusive banking representative regarding
potential acquisitions by the Company. Under the Acquisition Services
Agreement, Pacific Crest is entitled to reimbursement for certain out-of-
pocket expenses and, for each completed acquisition, a transaction fee of
$100,000 plus 1% of the value of any company or assets acquired. In connection
with the acquisition of Westbeach Snowboard Canada Ltd., Pacific Crest
received a fee of $159,030 and was reimbursed $3,694 for certain out-of-pocket
expenses related to the acquisition.
Since October 1996, the Company has been purchasing manufacturing tooling
and supplies ("tooling") from Morrow Aircraft Corporation ("Morrow Aircraft").
Such purchases have been through a series of separate independent purchase
orders. Purchases through December 27, 1997 totaled $553,000 compared to
$67,000 in 1996. The increase in purchases from Morrow Aircraft in 1997
reflected an increase in the portion of total tooling purchased from Morrow
Aircraft, additional tooling required for the Company's new step-in binding
and the shifting of all tooling production for 1998-1999 season snowboards to
1997. The Company believes that such tooling is being acquired on terms as
favorable or better than available from other vendors. Additionally, the
Company believes it is now receiving its tooling in a more timely fashion and
with the devotion of less Company resources to insuring the tooling complies
with the Company's bid specifications and requirements.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors will request that the shareholders ratify its
selection of Arthur Andersen, LLP, independent auditors, to audit the
financial statements of the Company for the fiscal year ending December 26,
1998. Arthur Andersen, LLP audited the financial statements of the Company for
the fiscal year ended December 27, 1997.
It is expected that representatives of Arthur Andersen, LLP will be present
at the Annual Meeting to make a statement if they desire to do so and respond
to shareholders' questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN, LLP AS INDEPENDENT AUDITORS OF THE COMPANY.
11
<PAGE>
PROPOSALS OF SHAREHOLDERS
Shareholder proposals intended for inclusion in the proxy materials for the
Company's 1999 Annual Meeting of Shareholders must be received by the Company
not later than January 25, 1999. Such proposals should be directed to the
Corporate Secretary, Morrow Snowboards, Inc., 2600 Pringle Road, S.E., Salem,
Oregon 97302.
OTHER BUSINESS
The Board of Directors does not intend to present any business at the Annual
Meeting other than as set forth in the accompanying Notice of Annual Meeting
of Shareholders, and has no present knowledge that any others intend to
present business at the Annual Meeting. However, if other matters requiring
the vote of the shareholders properly come before the Annual Meeting or any
adjournment or postponement thereof, the persons named in the accompanying
form of proxy will have discretionary authority to vote the proxies held by
them in accordance with their judgment as to those matters.
ANNUAL REPORT
A copy of the Company's 1997 Annual Report to Shareholders, which includes
the Company's Annual Report on Form 10-K for the fiscal year ended December
27, 1997, accompanies this Proxy Statement.
By Order of the Board of Directors
/s/ P. Blair Mullin
P. Blair Mullin
President, Chief Financial Officer,
Treasurer and Secretary
Salem, Oregon
May 25, 1998
12
<PAGE>
LOGO
MORROW SNOWBOARDS, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints P. Blair Mullin and J. Scott Sibley, and each
of them, as Proxies, with full power of substitution, and hereby authorizes
them to represent and to vote, as designated below, all the shares of Common
Stock of Morrow Snowboards, Inc. held of record by the undersigned on May 19,
1998 at the Annual Meeting of Shareholders to be held on June 24, 1998.
1. ELECTION OF DIRECTORS. Election of the following six nominees to serve as
directors for one-year terms or until their respective successors are
elected and qualified.
Ray E. Morrow, Jr. Maurice C. Bickert Gregory M. Eide
Erik J. Krieger Victor G. Petroff James V. Zaccaro
[_] FOR all nominees [_] WITHHOLD AUTHORITY to vote for all nominees
[_] WITHHOLD AUTHORITY for the following only:
(write the name(s) of the nominee(s) in this space)
-----------------------------------------------------------------------------
2. RATIFICATION OF INDEPENDENT AUDITORS FOR 1998. Ratify the selection of
Arthur Andersen, LLP as the Company's independent auditors for the fiscal
year ending December 26, 1998.
[_] FOR[_] AGAINST[_] ABSTAIN
LOGO
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. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND
"FOR" ITEM 2.
Please sign below exactly as your
name appears on your stock
certificate. When shares are held
jointly, each person should sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. An authorized
person should sign on behalf of
corporations, partnerships and
associations and give his or her
title.
Dated: _____________________, 1998
----------------------------------
Signature
----------------------------------
Signature if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL HELP SAVE THE EX-
PENSE OF ADDITIONAL SOLICITATION EFFORTS
