<PAGE> 1
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 240.14a-11(c) or 240.14a-12
DECKERS OUTDOOR CORPORATION
- --------------------------------------------------------------------------------
(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:
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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
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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
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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<PAGE> 2
DECKERS OUTDOOR CORPORATION
April 13, 1998
Dear Stockholder:
We cordially invite you to attend our 1998 Annual Meeting of Stockholders
to be held at 5:00 p.m. on Friday, May 15, 1998 at the Radisson Hotel Santa
Barbara, 1111 East Cabrillo Boulevard, Santa Barbara, California 93103. Enclosed
are the Notice of Annual Meeting, Proxy Statement and a Proxy Card relating to
the Annual Meeting which we urge you to read carefully. Also enclosed is the
Company's 1997 Annual Report to Stockholders on Form 10-K. Whether or not you
expect to attend the Annual Meeting, please sign and date the enclosed Proxy
Card and return it as promptly as possible to ensure that your shares will be
voted. Properly executed Proxy Cards received by the Company prior to the Annual
Meeting will be voted in accordance with the instructions indicated in such
cards. Because mail delays occur frequently, it is important that the enclosed
Proxy Card be returned well in advance of the meeting.
ON BEHALF OF YOUR
BOARD OF DIRECTORS
DOUGLAS B. OTTO
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
DECKERS OUTDOOR CORPORATION
495A S. FAIRVIEW AVENUE, GOLETA, CALIFORNIA 93117
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1998
TO THE STOCKHOLDERS OF
DECKERS OUTDOOR CORPORATION
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Deckers Outdoor Corporation, a Delaware corporation (the
"Company"), will be held at the Radisson Hotel Santa Barbara, 1111 East Cabrillo
Boulevard, Santa Barbara, California 93103, on Friday, May 15, 1998, beginning
at 5:00 p.m., local time. The Annual Meeting will be held for the following
purposes:
1. To elect two (2) directors of the Company to serve as Class II
directors until the Annual Meeting of Stockholders to be held in 2001.
2. To approve an amendment to the Company's 1993 Employee Stock
Incentive Plan, as amended (the "Plan"), to (a) increase the number of
shares reserved for issuance thereunder by 1,000,000 shares to an aggregate
of 2,000,000 shares, (b) extend the duration of the Plan for a period of
five years for a total duration of ten years and (c) modify certain other
provisions.
3. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent auditors.
4. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
The Board of Directors has fixed March 27, 1998 as the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any postponements or adjournments thereof, and only stockholders of
record at the close of business on that date are entitled to such notice and to
vote at the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the offices of the Company for ten (10) days prior to the Annual
Meeting.
We hope that you will use this opportunity to take an active part in the
affairs of the Company by voting on the business to come before the Annual
Meeting either by executing and returning the enclosed Proxy Card or by casting
your vote in person at the Annual Meeting.
STOCKHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A STAMPED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF A STOCKHOLDER RECEIVES MORE THAN
ONE PROXY CARD BECAUSE HE OR SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR
ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED.
BY ORDER OF THE BOARD OF DIRECTORS
DIANA M. WILSON
Chief Operating Officer,
Vice President and Secretary
Goleta, California
April 13, 1998
<PAGE> 4
DECKERS OUTDOOR CORPORATION
495A S. FAIRVIEW AVENUE
GOLETA, CALIFORNIA 93117
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1998
-------------------------
PROXY STATEMENT
-------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Deckers Outdoor Corporation, a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 5:00 p.m., local time, on May 15, 1998, at the
Radisson Hotel Santa Barbara, 1111 East Cabrillo Boulevard, Santa Barbara,
California 93103, and any postponements or adjournments thereof for the purposes
set forth in the accompanying Notice of Annual Meeting. This Proxy Statement and
the accompanying Form of Proxy were first mailed to stockholders on or about
April 13, 1998.
RECORD DATE AND VOTING
March 27, 1998 has been fixed as the record date (the "Record Date") for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting, and any postponements or adjournments thereof. As of March 27,
1998, there were 8,777,329 shares of the Company's common stock, par value $.01
per share (the "Common Stock"), issued and outstanding. No shares of the
Company's preferred stock, par value $.01 per share, were outstanding as of that
date. A majority of the shares of Common Stock entitled to vote, present in
person or represented by proxy, will constitute a quorum at the meeting.
Each share of Common Stock issued and outstanding on the Record Date is
entitled to one vote on any matter presented for consideration and action by the
stockholders at the Annual Meeting. With respect to all matters other than the
election of directors, including the approval of the proposal to amend the Plan,
the affirmative vote of a majority of shares of the Company's Common Stock
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter will be the act of the stockholders. Directors will be
elected by a plurality of the votes of the shares of the Company's Common Stock
present in person or represented by proxy and entitled to vote on the election
of directors. Abstentions will be treated as the equivalent of a negative vote
for the purpose of determining whether a proposal has been adopted and will have
no effect for the purpose of determining whether a director has been elected.
Unless otherwise instructed, proxies solicited by the Company will be voted
"FOR" the nominees named herein for election as director, "FOR" the proposal to
increase the number of shares of the Common Stock reserved for issuance pursuant
to the Plan, extend the duration of the Plan and modify certain other provisions
of the Plan, "FOR" the ratification of the selection of KPMG Peat Marwick LLP as
the Company's independent auditors, and in their discretion upon such other
business as may properly come before such meeting or any and all postponements
or adjournments thereof.
With respect to brokers who are members of the New York Stock Exchange, the
New York Stock Exchange Rules ("NYSE Rules") generally require that when shares
are registered in street or nominee name, its member brokers must receive
specific instructions from the beneficial owners in order to vote on certain
proposals. However, the NYSE Rules do not require specific instructions in order
for a broker to vote on the election of the Class II directors, the amendment of
the Plan and on ratification of the selection of the Company's independent
auditors. If a member broker indicates on the proxy that such broker does not
have discretionary authority as to certain shares to vote on any proposal that
does require specific instructions, those shares will not be considered as
present and entitled to vote with respect to that matter. Pursuant to Delaware
law, a broker non-vote will not be treated as present or voting in person or by
proxy on the proposal. A broker non-vote will have no effect for the purpose of
determining whether a director has been elected.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by giving written notice of revocation to the Secretary of the
Company, by executing a subsequent proxy, or by attending the Annual Meeting and
voting in person. Subject to any such revocation, all shares represented by
properly executed proxies will be voted in accordance with the specifications on
the enclosed proxy card.
1
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's By-Laws state that the Board of Directors shall consist of
not less than one nor more than seven members. The specific number of Board
members within this range is established by the Board of Directors and is
currently set at six. The Company's Certificate of Incorporation provides that
the Board shall be classified into three classes of directors, which classes
serve staggered three-year terms. The Board consists of two Class I directors,
two Class II directors and two Class III directors. The current term of each
Class I director expires at the Annual Meeting of Stockholders to be held in
2000, the current term of each Class II director expires at the Annual Meeting
of Stockholders to be held in 1998, and the current term of each Class III
director expires at the Annual Meeting of Stockholders to be held in 1999. The
Board of Directors is proposing Rex A. Licklider and Karl F. Lopker, who are now
serving as Class II directors, for election as Class II directors at the Annual
Meeting. Each of the Class II directors elected at the Annual Meeting will serve
until the Annual Meeting of Stockholders to be held in 2001, until such
director's successor has been duly elected and qualified or until such director
has otherwise ceased to serve as a director. To the Company's knowledge, each
nominee is and will be available to serve. The nominees have supplied the
following background information to the Company:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE LAST 5 YEARS,
OTHER BUSINESS DIRECTOR
NAME AGE EXPERIENCE AND DIRECTORSHIPS SINCE
---- --- --------------------------------------------- --------
<S> <C> <C> <C>
Rex A. Licklider.................. 55 Chairman of the Board and Chief Executive 1993
Officer of Com Systems, Inc., a long distance
telecommunications company, from 1975 to
February 1992, Chairman of the Board of
Resurgens Communications Group, with whom Com
Systems, Inc. had merged, from February 1992
to January 1993, and a private investor since
January 1993. Currently, he is a Director of
The Sports Club Co.
Karl F. Lopker.................... 46 Co-founder of the Company in 1973, and, since 1995
1979, Chief Executive Officer and Director of
QAD, Inc., a developer and marketer of
computer software.
</TABLE>
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE
"FOR" THE ELECTION OF THE ABOVE NOMINEES.
2
<PAGE> 6
MANAGEMENT
The directors and executive officers of the Company are set forth below.
The following table includes information with respect to each director and
executive officer of the Company.
<TABLE>
<CAPTION>
CLASS OF
NAME AGE POSITION DIRECTOR
---- --- -------- --------
<S> <C> <C> <C>
Douglas B. Otto................... 46 Chairman of the Board, President and Chief III
Executive Officer
Diana M. Wilson................... 39 Director, Chief Operating Officer, I
Vice President and Secretary
Ronald D. Page.................... 58 Director, Managing Director -- European I
Operations and Executive Vice
President -- Sales
M. Scott Ash...................... 33 Chief Financial Officer
Robert M. Beatty.................. 36 Vice President -- Finance and Operations
James R. Van Dine................. 44 Vice President -- Sales and Marketing
Gene E. Burleson.................. 57 Director III
Rex A. Licklider.................. 55 Director II
Karl F. Lopker.................... 46 Director II
</TABLE>
Douglas B. Otto, co-founder of the Company in 1973, has served as an
executive officer since that time and as Chairman of the Board, President and
Chief Executive Officer since 1982. He also served as Chief Financial Officer
from June 1990 through December 1992.
Diana M. Wilson has been Chief Operating Officer and Vice President of the
Company and the Chief Executive Officer of Ugg Holdings, Inc. since August 1995
and has been the Secretary of the Company since August 1993. She has been a
Director of the Company since February 1997. She served as Chief Financial
Officer from January 1993 to January 1997 and served as Controller of the
Company from August 1990 to January 1993. Prior to joining the Company, she was
employed by KPMG Peat Marwick LLP from January 1988 to April 1990. Ms. Wilson is
a Certified Public Accountant.
Ronald D. Page joined the Company as a sales manager in May 1991, became
Vice President -- Sales in January 1993 and has been Executive Vice
President -- Sales since August 1995 and Managing Director -- European
Operations since March 1997. Mr. Page has been a Director of the Company since
August 1993.
M. Scott Ash has been Chief Financial Officer since January 1997. Prior to
such time, Mr. Ash served as Controller of the Company, beginning in January
1993. Prior to joining the Company, he was employed by Dole Food Company, Inc.
from August 1992 to January 1993 as Manager of Corporate Reporting. Previously
he was a Senior Manager at KPMG Peat Marwick LLP where he was employed from
September 1986 to August 1992. Mr. Ash is a Certified Public Accountant.
Robert M. Beatty has been the Company's Vice President -- Finance and
Operations since September 1997. Mr. Beatty served as the Company's Director of
Operations Support from October 1996 to September 1997 and as the Company's
Credit Manager from April 1996 to October 1996. Previously he was a Vice
President at Bank of America where he was employed from 1986 to 1996.
James R. Van Dine has been the Company's Vice President -- Sales and
Marketing since September 1997. Mr. Van Dine served as the Company's Vice
President -- Sales, Simple from December 1996 to September 1997 and as the
Company's National Sales Manager, Simple from November 1995 to December 1996.
Previously, Mr. Van Dine was employed by Reebok International, where he was
Regional Vice President from June 1991 to October 1995.
Gene E. Burleson has been a Director of the Company since September 1993.
From February 1997 to August 1997, Mr. Burleson was Chief Executive Officer and
a Director of Vitalink Pharmacy Services, Inc., a provider of pharmacy services
to nursing facilities. From October 1989 to February 1997, Mr. Burleson was
employed by GranCare, Inc., a provider of routine and specialty medical care and
rehabilitative services, where he served as President and a Director from
October 1989 to December 1990 and as Chief Executive
3
<PAGE> 7
Officer and a Director from December 1990 to February 1997. He assumed the
position of Chairman of the Board of GranCare, Inc. in January 1994 and served
in this capacity until November 1997, when GranCare, Inc. was merged into
Paragon Health Network, Inc. Mr. Burleson became a Director of Paragon Health
Network, Inc. in November 1997. Mr. Burleson is also a Director of Alternative
Living Services, Inc. and Walnut Financial Services, Inc. From June 1986 to
March 1989, Mr. Burleson was President and Chief Operating Officer of American
Medical International, Inc., an owner and operator of acute care hospitals.
Rex A. Licklider has been a Director of the Company since September 1993.
From 1975 until February 1992, Mr. Licklider served as Chairman of the Board and
Chief Executive Officer of Com Systems, Inc., a long distance telecommunications
company. From February 1992 to January 1993, Mr. Licklider was Chairman of the
Board of Resurgens Communications Group, with whom Com Systems, Inc. had merged.
Since January 1993, Mr. Licklider has been a private investor. Mr. Licklider is
currently a Director of The Sports Club Co.
Karl F. Lopker has been a Director of the Company since May 1995 and was
originally a co-founder of the Company in 1973. Since 1979, Mr. Lopker has been
Chief Executive Officer and a Director of QAD Inc., a developer and marketer of
computer software.
For information concerning beneficial ownership of Common Stock by
directors and executive officers, see "Security Ownership of Certain Beneficial
Owners and Management" below.
CERTAIN RELATIONSHIPS
On March 26, 1997, the Company repurchased 25,000 shares of common stock
from Ronald D. Page in connection with the Company's stock repurchase program.
The repurchase price was $6.625 per share, $0.125 less than the closing stock
price on that date, for an aggregate price of $165,625.
On April 18, 1997, in order to increase Diana M. Wilson's equity interest
in the Company the Company issued Ms. Wilson a $624,000 note to purchase 100,000
shares of the Company's Common Stock at the fair market value on that date. The
note bears interest at 6.39% and is secured by the stock so acquired and by any
severance pay, including any unpaid bonuses. The largest aggregate amount of
indebtedness outstanding at any time during 1997 was $651,912, including accrued
interest of $27,912. As of February 28, 1998, the balance outstanding was
$658,557, including accrued interest of $34,557.
In March 1996, the Company loaned $60,000 to Jeffrey C.L. Hoffman to assist
Mr. Hoffman in the purchase of a residence. The largest aggregate amount of
indebtedness outstanding at any time during 1997 was $68,534, including accrued
interest of $8,534. As a result of Mr. Hoffman's resignation in October 1997,
the promissory note became due and payable in December 1997. As of February 28,
1998, the balance outstanding was $57,559, including accrued interest of $1,525.
The Company is currently working with Mr. Hoffman to obtain payment of the
balance owed under the promissory note, which is secured by any potential
amounts due to Mr. Hoffman by the Company.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
Audit Committee -- The Board has a standing Audit Committee that reviews
the audit and control functions of the Company, the Company's accounting
principles, policies and practices and financial reporting, the scope of the
audit conducted by the Company's auditors, the fees and all non-audit services
of the independent auditors and the independent auditors' opinion and letter of
comment to management and management's response thereto. The committee met three
times during 1997. At the date of this Proxy Statement the Audit Committee was
comprised of Messrs. Burleson, Licklider, and Lopker.
Compensation Committee -- The Board has a Compensation Committee (the
"Compensation Committee") that is authorized to review and recommend to the
Board the salaries, bonuses and prerequisites of the Company's executive
officers. The Compensation Committee also reviews and recommends to the Board
any new compensation or retirement plans and administers the Company's 1993
Employee Stock Incentive Plan
4
<PAGE> 8
(the "1993 Plan") and the Company's 1995 Employee Stock Purchase Plan (the "1995
Plan"). The committee met four times during 1997. At the date of this Proxy
Statement the Compensation Committee was comprised of Messrs. Burleson,
Licklider and Lopker.
DIRECTOR ATTENDANCE
In 1997, the Company held four meetings of the Board of Directors. During
1997, all of the directors attended at least 75% of the aggregate of the
meetings of the Board and of the committees of which they were members, except
for Ron Page who is working in Europe as Managing Director -- European
Operations.
DIRECTOR COMPENSATION
Standard Compensation -- Directors who are not employees of the Company or
its subsidiaries ("Nonemployee Directors") receive an Annual Retainer to be paid
as follows: $11,000 in cash, or, at the option of a Nonemployee Director,
exercised ten days prior to the start of each year, in Common Stock of the
Company at a 20% discount off the price of the shares at the closing price at
the beginning of the year; and 500 shares of the Common Stock of the Company per
quarter (2,000 shares annually), vesting on the first day of each quarter. On
January 1, 1999 and every three years thereafter, the Board will set the number
of shares for the following three years. Additionally, Nonemployee Directors
receive $1,500 for each meeting of the Board and $1,000 for each separately
scheduled committee meeting that they attend plus reimbursement of any expenses
they may incur with respect to such meetings. Committee Chairmen receive
additional annual retainer fees of $4,000. Directors who are employees of the
Company or its subsidiaries serve as directors without compensation.
Stock Options -- Nonemployee Directors receive additional compensation in
the form of stock options granted automatically under the 1993 Plan. Upon their
initial election to the Board of Directors, Nonemployee Directors automatically
receive options to purchase 10,000 shares of Common Stock. Such options vest in
annual one-third installments, with the first such installment vesting on the
first anniversary of the date of grant of such option. In addition, beginning on
the fourth annual meeting of stockholders after a Nonemployee Director is first
elected, such Nonemployee Director will automatically be granted each year
options to purchase 2,000 shares of Common Stock. Such additional options will
be fully vested and exercisable at the time of grant. All options granted to
Nonemployee Directors have an exercise price equal to the fair market value of
the shares on the date of grant of such option.
5
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the years ended December 31, 1997, 1996
and 1995, the reportable compensation paid or awarded to the Chief Executive
Officer and to each of the four other most highly compensated executive officers
of the Company who were executive officers of the Company at December 31, 1997
and received compensation in excess of $100,000 in such year (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ UNDERLYING
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (#) COMPENSATION
--------------------------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas B. Otto.............. 1997 $275,000 $ 250,000 -- -- $120,000(5)
President and Chief 1996 274,000 250,000 -- -- --
Executive
Officer 1995 260,000 102,000 -- -- --
Diana M. Wilson.............. 1997 238,000 123,000 -- -- --
Chief Operating Officer, 1996 180,000 76,000 -- -- --
Vice President and 1995 140,000 91,000 -- 240,000(1) --
Secretary
Ronald D. Page............... 1997 150,000 30,000 61,000(4) 20,000 --
Managing Director -- 1996 150,000 91,000 -- -- --
European Operations and 1995 130,000 10,000 -- 37,000(1) --
Executive Vice
President -- Sales
James R. Van Dine............ 1997 114,000 29,000 -- 25,000 --
Vice President -- 1996 100,000 17,000 -- -- --
Sales and Marketing
M. Scott Ash................. 1997 103,000 32,000 -- 20,000 --
Chief Financial Officer
Jeffrey C.L. Hoffman......... 1997 119,000 52,000 28,000(2) -- --
Vice President -- Marketing 1996 120,000 57,000 -- -- --
1995 95,000 77,000 -- 50,000 --
Keith F. Sparks.............. 1997 136,000 41,000 -- -- 30,000(3)
Vice President -- Sales, 1996 120,000 49,000 -- -- --
Teva, Ugg and Trukke 1995 104,000 23,000 -- 50,000 --
</TABLE>
- ---------------
(1) In February 1995, the Board of Directors approved the repricing of certain
stock options. The number of shares indicated includes the following number
of shares under options that were repriced in 1995: Diana M.
Wilson -- 15,000 and Ronald D. Page -- 12,000.
(2) Mr. Hoffman resigned in October 1997. He provided consulting services to the
Company from November 1997 through March 1998 for up to $14,166 per month.
(3) Mr. Sparks resigned in December 1997. As a result of his resignation, he
received severance of $30,000.
(4) Mr. Page has worked in Europe as Managing Director-European Operations since
March 1997. As a result, he received living allowances totalling $61,000 in
1997.
(5) In 1997, the Company entered into a split-dollar life insurance agreement
with a trust established by Douglas B. Otto, pursuant to which the Company
and the trust will share in the premium costs of life insurance policies
that pay cumulative death benefits upon the death of Mr. Otto. The portion
of the premium equal to the value of the economic benefit is paid by the
trust, with the Company paying the remainder of the premiums. The amount
above, $120,000, reflects the present value of the economic benefit to Mr.
Otto of the portion of the premium paid by the Company in 1997. Upon
surrender of the
6
<PAGE> 10
policy or payment of the death benefits thereunder, the Company is entitled
to repayment of an amount equal to the cumulative payments previously paid
by the Company.
The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock granted in 1997 to the Named
Executive Officers.
STOCK OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS RATES OF STOCK
GRANTED APPRECIATION FOR
TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(#) IN 1997 (PER SHARE) DATE 5% 10%
---- ---------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Douglas B. Otto................. -- -- $ -- -- $ -- $ --
Diana M. Wilson................. -- -- -- -- -- --
Ronald D. Page.................. 20,000 9.4% 8.500 11-14-2007 107,000 271,000
James R. Van Dine............... 10,000 4.7% 7.500 05-30-2007 47,000 120,000
15,000 7.1% 8.500 11-14-2007 80,000 203,000
M. Scott Ash.................... 10,000 4.7% 7.500 02-07-2007 47,000 120,000
10,000 4.7% 8.500 11-14-2007 53,000 135,000
Jeffrey C.L. Hoffman............ -- -- -- -- -- --
Keith F. Sparks................. -- -- -- -- -- --
</TABLE>
- ---------------
(1) The 5% and 10% assumed rates of appreciation are specified under the rules
of the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
The following table sets forth, for the Named Executive Officers,
information with respect to options exercised, unexercised options and year-end
option values, in each case with respect to options to purchase shares of the
Company's Common Stock.
AGGREGATED OPTION EXERCISES IN 1997 AND
1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997(#) DECEMBER 31, 1997
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas B. Otto............... -- $ -- -- -- $ -- $ --
Diana M. Wilson............... -- -- 143,250 118,000 165,363 20,000
Ronald D. Page................ -- -- 31,000 26,000 30,000 20,000
James R. Van Dine............. -- -- 9,000 26,000 7,000 10,500
M. Scott Ash.................. -- -- 23,000 20,000 82,070 8,000
Jeffrey C.L. Hoffman.......... 5,000 10,938 -- -- -- --
Keith F. Sparks............... 15,000 40,000 -- -- -- --
</TABLE>
7
<PAGE> 11
The following table sets forth, for the Named Executive Officers,
information with respect to repricings of stock options during 1995.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET EXERCISE OPTION TERM
UNDERLYING PRICE OF STOCK PRICE NEW REMAINING
REPRICING OPTIONS AT TIME OF AT TIME EXERCISE AT DATE OF
NAME DATE REPRICED(#) REPRICING($) OF REPRICING PRICE($) REPRICING
---- --------- ------------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Douglas B. Otto............ -- -- $ -- $ -- $ -- --
Diana M. Wilson............ 02-17-95 15,000 12.00 14.63 12.00 4 yrs
Ronald D. Page............. 02-17-95 12,000 12.00 14.63 12.00 4 yrs
James R. Van Dine.......... -- -- -- -- -- --
M. Scott Ash............... 02-17-95 2,000 12.00 14.63 12.00 4 yrs
Jeffrey C.L. Hoffman....... -- -- -- -- -- --
Keith F. Sparks............ -- -- -- -- -- --
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF STOCK OPTIONS
In February 1995, the Committee repriced all outstanding stock options,
other than those which were already in the money, which were held by executive
officers and other employees. Such options were repriced to $12.00 per share,
the fair market value of the Company's common stock on the date of the
repricing. All other terms of the existing stock options remained unchanged.
Such repricing was approved by the Committee in order to incentivize the
executive officers and employees. The Committee determined that the decrease in
the market price of the Company's common stock since the date of grant was not
reflective of the individual performance of the executive officers and other
employees but was the result of unforeseen factors beyond their control.
COMPENSATION COMMITTEE
Gene E. Burleson
Rex A. Licklider
Karl F. Lopker
The Report of the Compensation Committee on Repricing of Stock Options
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such acts.
EMPLOYMENT AGREEMENTS
Effective January 1992, Douglas B. Otto entered into a five-year employment
agreement with the Company, which was subsequently extended through 2001. Such
employment agreement provides for an annual salary of $260,000, with annual cost
of living increases and a bonus of up to $500,000 per year, determined by the
Compensation Committee, based upon the operating results of the Company. In the
event Mr. Otto's employment agreement is terminated for any reason, including
"For Cause" as defined therein, Mr. Otto will receive an annual payment of
$260,000 and his existing employee benefits for five years from the date of
termination. After any termination of employment, Mr. Otto may not compete with
the Company for one year in the United States (except in Montana and Wyoming).
The Company may not terminate such employment agreement except "For Cause."
Diana M. Wilson entered into an employment agreement with the Company,
effective August 4, 1995, which was subsequently amended on April 18, 1997,
effective January 1, 1997 through December 31, 1999. As amended, the agreement
provides for an annual salary of $240,000 with a potential bonus of up to
$240,000. In
8
<PAGE> 12
order to increase Ms. Wilson's equity interest in the Company, the agreement
also provides for a loan by the Company to Ms. Wilson to purchase up to 100,000
shares of the Company's common stock at fair market value on April 18, 1997. The
promissory note bears interest at 6.39% and is secured by the stock so acquired
and, under certain circumstances, by any severance pay, including any unpaid
bonuses. In connection with her employment agreement, Ms. Wilson was granted an
option to purchase 200,000 shares of the Company's common stock at an exercise
price of $9.50, the fair market value of the Company's common stock on the date
of grant. This option vests with respect to 20,000 shares on August 4, 1995 and
the remainder vests in annual 36,000 share installments on August 4, 1996
through August 4, 2000. Such option expires in August 2005. In the event Ms.
Wilson's employment is terminated for reasons other than: (1) cause, or (2)
voluntary termination, she will receive six months severance plus committed
incentives. In the event there is a change of control and termination or
constructive termination, she will receive twelve months severance, including
minimum guarantees, plus the acceleration of vesting of all stock options.
The other officers of the Company do not have employment agreements with
the Company and serve at the pleasure of the Board.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors,
consisting entirely of directors who have never served as officers or employees
of the Company or any of its subsidiaries, except for Mr. Lopker who was
formerly the President of the Company from 1976 to 1982, determines and
administers the compensation of the Company's executive officers. Set forth
below are the principal factors underlying the Committee's philosophy used in
setting compensation.
Compensation Philosophy -- At the direction of the Board of Directors, the
Committee endeavors to ensure that the compensation programs for executive
officers of the Company and its subsidiaries are competitive and consistent in
order to attract and retain key executives critical to the Company's long-term
success. The Committee believes that the Company's overall financial performance
should be an important factor in the total compensation of executive officers.
At the executive officer level, the Committee has a policy that a significant
proportion of potential total compensation should consist of variable,
performance-based components, such as stock options, stock awards and bonuses,
which can increase or decrease to reflect changes in corporate and individual
performance. These incentive compensation programs are intended to reinforce
management's commitment to enhancement of profitability and stockholder value.
The Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation for the chief executive officer and other executive
officers. While the Committee considers such corporate performance measures as
net sales, net income and earnings per common and common equivalent shares, the
Committee does not apply any specific quantitative formula in making
compensation decisions. The Committee also appreciates the importance of
achievements that may be difficult to quantify, and accordingly recognizes
qualitative factors, such as successful supervision of major corporate projects,
demonstrated leadership ability and contributions to industry and community
development. For 1997, the most important qualitative factors in determining
incentive compensation awards to executive officers were the Committee's
assessments of their contributions to the Company's stockholder value, sales,
gross margin and net earnings.
The Committee also evaluates the total compensation of the Company's chief
executive officer and other executive officers in light of information regarding
the compensation practices and corporate financial performance of similar
companies in the Company's industry. However, the Committee does not target a
specific percentile range within the peer group compensation structure in
determining compensation for executive officers. From time to time, the
Committee also receives assessments and advice regarding the Company's
compensation practices from independent compensation consultants.
Relationship of Performance to Compensation -- Compensation that may be
earned by the executive officers in any fiscal year consists of base salary,
cash bonus and stock options. Base salaries for the chief executive officer and
other executive officers are established at levels that are considered to be at
the
9
<PAGE> 13
"low-end" of the range for the peer group, after considering the duties and
scope of responsibilities of each officer's position. Salaries are reviewed
periodically and adjusted as warranted to reflect sustained individual
performance. The Committee focuses primarily on total annual compensation,
including incentive awards and cash bonuses, rather than base salary alone, as
the appropriate measure of executive officer performance and contribution.
The executive officers receive incentive compensation awards based on
individual goals and milestones established for each officer at the beginning of
each year and other factors as determined by the Committee. Such officers
receive compensation for the subsequent attainment of these goals.
The 1993 Employee Stock Incentive Plan (the "1993 Plan") authorizes the
Committee to make grants and awards of stock options, stock appreciation rights,
restricted stock and other stock-based awards. The Committee grants stock
options to executive officers, as well as other employees of the Company and its
subsidiaries below the executive officer level. Executive officers are eligible
to receive stock option grants, which the Committee approves from time to time
as it deems appropriate.
In approving grants and awards under the 1993 Plan, the quantitative and
qualitative factors and industry comparisons outlined above will be considered.
The number of options previously awarded to and held by executive officers is
reviewed but is not an important factor in determining the size of current
option grants.
Subject to approval by the shareholders, the Committee has approved changes
to the 1993 Plan, including an increase in the number of shares reserved for
issuance under the Plan from 1,000,000 shares to 2,000,000 shares and to extend
the duration of the Plan by five years, for an aggregate duration of ten years.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various payments and
benefits. Some types of compensation payments and their deductibility (e.g., the
spread of exercise of non-qualified options) depend upon the timing of an
executive's vesting or exercise of previously granted rights. Further,
interpretations of and changes in the tax laws and other factors beyond the
Committee's control also affect the deductibility of compensation.
Chief Executive Officer Compensation -- Douglas B. Otto entered into a five
year employment agreement, effective January 1992, and subsequently extended
through 2001. Such employment agreement provides for an annual salary of
$260,000, with annual cost of living increases, and provides for a bonus of up
to $500,000 per year, determined by the Compensation Committee, based upon a
combination of factors including the Company's common stock price and the
operating results of the Company.
In evaluating the discretionary bonus component of the compensation of
Douglas B. Otto, Chairman of the Board, President and Chief Executive Officer of
the Company, the Committee has taken into consideration Mr. Otto's long service
with the Company and the significant contributions he has made toward the
Company's growth and financial stability. For 1997, the Committee determined Mr.
Otto's bonus based on three criteria: the Company's stock price in relation to
that of the Company's Peer Group; the Company's ability to achieve targeted
goals for earnings per share; and a general assessment by the Committee of his
contributions to the Company. In 1997, the Company's stock price performance met
the lower end of the target range. In addition, earnings targets were achieved
for certain quarters, but were not achieved for other quarters. Mr. Otto's 1997
bonus was therefore based upon the Company's ability to achieve such targets
together with a general assessment by the Committee of his contributions to the
Company. Mr. Otto was not granted any stock options during fiscal year 1997,
although the Committee may grant such options in the future.
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<PAGE> 14
In November 1997, the Committee established the compensation of the
Company's executive officers for fiscal year 1998. In each case, the Committee's
decision was based upon the principles and procedures outlined above.
COMPENSATION COMMITTEE
Gene E. Burleson
Rex A. Licklider
Karl F. Lopker
The Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the date of this Proxy Statement, the members of the Compensation
Committee were Messrs. Burleson, Licklider and Lopker, none of whom was an
officer or employee of the Company or any of its subsidiaries during fiscal year
1997 or is a former officer or employee of the Company or any of its
subsidiaries, except for Mr. Lopker who was formerly the President of the
Company from 1976 to 1982.
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<PAGE> 15
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Nasdaq Composite Index and a peer group index for
the period commencing October 14, 1993 (the effective date of the registration
statement for the Company's Common Stock) and ending December 31, 1997. The data
represented below assumes $100 invested in each of the Company's Common Stock,
the Nasdaq Composite Index and the peer group index on October 14, 1993. The
stock performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
acts.
COMPARISON OF TOTAL RETURN (ASSUMING DIVIDEND REINVESTMENT)
SINCE THE INITIAL PUBLIC OFFERING OF DECKERS OUTDOOR CORPORATION
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DECKERS OUTDOOR ATHLETIC SHOE
(FISCAL YEAR COVERED) CORPORATION NASDAQ COMPOSITE COMPOSITE
<S> <C> <C> <C>
14-OCT-93 100.00 100.00 100.00
31-DEC-93 120.00 99.00 103.40
31-DEC-94 83.30 96.70 128.00
31-DEC-95 38.30 136.80 170.30
31-DEC-96 45.90 168.20 271.80
31-DEC-97 50.00 206.50 190.40
</TABLE>
* Athletic Shoe Composite peer group index consisting of Hyde Athletic
Industries, Inc. (Class B), K-Swiss, L.A. Gear Inc., Nike Inc., Reebok
International Ltd., Rocky Boots & Shoes Inc., The Stride Rite Company, The
Timberland Company, Vans Inc., Wolverine World Wide Inc., Fila Holding SPA,
and Kenneth Cole Productions.
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<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following security ownership information is set forth, as of February
28, 1998, with respect to certain persons or groups known to the Company to be
beneficial owners of more than 5% of the Company's outstanding Common Stock and
with respect to each director of the Company, each of the Named Executive
Officers, and all current directors, nominees and executive officers as a group
(eleven persons). Other than as set forth below, the Company is not aware of any
other person who may be deemed to be a beneficial owner of more than 5% of the
Company's Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2),(4) PERCENT OF CLASS
------------------- --------------------------- ----------------
<S> <C> <C>
Douglas B. Otto(3)............................. 3,810,552 43.3%
FMR Corp.(7)................................... 596,900 6.8
Diana M. Wilson................................ 263,849 3.0
Ronald D. Page................................. 207,621 2.4
James R. Van Dine.............................. 11,000 *
M. Scott Ash................................... 25,000 *
Jeffrey C.L. Hoffman........................... --(5) *
Keith F. Sparks................................ 200(6) *
Gene E. Burleson............................... 37,791 *
Rex A. Licklider............................... 64,760 *
Karl F. Lopker................................. 21,357 *
All directors and executive officers as a group
(eleven persons)............................. 4,451,329 49.4%
</TABLE>
- ---------------
(1) The address of each beneficial owner is 495A S. Fairview Avenue, Goleta,
California 93117, unless otherwise noted.
(2) Unless otherwise noted, sole voting and dispositive power are possessed with
respect to all shares of Common Stock owned.
(3) Includes (a) 3,131,852 shares held by the Douglas B. Otto Trust as to which
Mr. Otto has sole voting and investment power, (b) 293,950 shares and
293,950 shares, respectively, held as custodian under the Uniform Gifts to
Minors Act for the benefit of Mr. Otto's daughter and son, and (c) 90,800
shares held by the Edgecliff Foundation, a charitable foundation formed by
Mr. Otto, of which Mr. Otto is the Chairman of the Board of Directors.
(4) Includes shares under stock options that are presently exercisable or are
exercisable within 60 days for the following: Diana M. Wilson -- 122,000;
Ronald D. Page -- 31,000; James R. Van Dine -- 11,000; M. Scott
Ash -- 14,000; Gene E. Burleson -- 10,000; Rex A. Licklider -- 10,000; Karl
F. Lopker -- 6,666; and all directors and executive officers as a
group -- 213,666.
(5) Mr. Hoffman resigned in October 1997. His address is 5265 Paseo Cameo, Santa
Barbara, California 93111.
(6) Mr. Sparks resigned in December 1997. His address is 9945 SW 141st Avenue,
Beaverton, Oregon 97005.
(7) Based on information included in a Schedule 13G filed by FMR Corp. for the
year ended December 31, 1997.
* Percentage of shares beneficially owned does not exceed 1% of the class so
owned.
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<PAGE> 17
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers and persons who own more
than 10% of the Common Stock (collectively "Section 16 Persons") to file initial
reports of ownership (Forms 3) and reports of changes in ownership of Common
Stock (Forms 4 and Forms 5) with the Securities and Exchange Commission as well
as the Company.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and representations from each Section 16 Person
known to the Company that no other reports were required, during the fiscal year
ended December 31, 1997, all Section 16(a) filing requirements applicable to its
Section 16 Persons were complied with except that (i) Douglas B. Otto filed on
March 30, 1998 a Form 4, which Form 4 was due on November 10, 1997 and filed on
March 30, 1998 a Form 4, which Form 4 was due on January 10, 1998, (ii) Diana M.
Wilson filed on April 1, 1998 a Form 5, which Form 5 was due on February 14,
1998, (iii) Ronald D. Page filed on April 2, 1998 a Form 5 which Form 5 was due
on February 14, 1998 and (iv) Gene E. Burleson, Karl F. Lopker and Rex A.
Licklider each filed a Form 4 on March 16, 1998, reporting transactions which
were reportable on Form 5, due February 14, 1998.
14
<PAGE> 18
PROPOSAL NO. 2
1993 EMPLOYEE STOCK INCENTIVE PLAN, AS AMENDED
The Company adopted the 1993 Employee Stock Incentive Plan in August 1993
and amended it in May 1994. The Plan is administered by the Compensation
Committee (the "Committee") of the Board of Directors, except that grants to
Nonemployee Directors are automatically made pursuant to a pre-determined
formula. The Committee consists solely of Nonemployee Directors. The Committee
has broad authority in administering and interpreting the Plan.
The purpose of the Plan is to enable the Company to attract, retain and
motivate employees by providing for or increasing their proprietary interests in
the Company and, in the case of Nonemployee Directors, to attract such directors
and further align their interests with those of the Company's stockholders by
providing for or increasing their proprietary interests in the Company. Under
the Plan, officers, directors, employees and independent sales representatives
of the Company are eligible to receive options to purchase Common Stock. As of
the date of this Proxy Statement, approximately 360 persons were eligible. The
par value of the Company's Common Stock is $.01 per share, and the closing price
of the Common Stock on the NASDAQ National Market System on March 27, 1998 was
$7.50 per share. Under the current provisions of the Plan no Award may be made
after August 1998, and no shares of Common Stock of the Company may be issued
upon exercise of any Award after August 2008.
The aggregate number of shares which may be issued pursuant to the grant of
Awards under the Plan is 1,000,000, subject to adjustment for certain
circumstances such as a stock exchange, reorganization, recapitalization, stock
split, reverse stock split, stock dividend or other capital change or
adjustment. At the Annual Meeting, the stockholders are being requested to
consider and approve the proposed amendments to the Plan to (a) increase the
number of shares reserved for issuance thereunder by 1,000,000 shares to an
aggregate of 2,000,000 shares, (b) extend the duration of the Plan for a period
of five years for a total duration of ten years and (c) modify certain other
provisions. The Board of Directors approved such amendments, subject to
stockholder approval, in February 1998.
AWARDS TO EMPLOYEES
The Plan authorizes the Committee to enter into any type of arrangement
with an eligible employee that, by its terms, involves or might involve the
issuance of Common Stock or any other security or benefit with a value derived
from the value of Common Stock. Awards to employees are not restricted to any
specified form or structure and may include, without limitation, sales or
bonuses of stock, restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares (collectively, "Awards").
An Award to an employee may consist of one such security or benefit or two or
more of them in tandem or in the alternative. Options granted under the Plan may
be options intended to qualify as incentive stock options (the "Incentive Stock
Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options not intended to so qualify (the "Non-Qualified Stock
Options").
An Award to an employee may permit the employee to pay all or part of the
purchase price of the shares or other property issuable pursuant thereto, and/or
to pay all or part of such employee's tax withholding obligation with respect to
such issuance, by (i) delivering previously owned shares of capital stock of the
Company or other property or (ii) reducing the amount of shares or other
property otherwise issuable pursuant to the award. If an option granted to an
employee permitted the employee to pay for the shares issuable pursuant thereto
with previously owned shares, the employee would be able to exercise the option
in successive transactions, known as pyramiding, to acquire a large number of
shares with no more investment than the original share or shares delivered upon
exercise of the option. The exercise price and any withholding taxes are payable
in cash by Nonemployee Directors, although the Board at its discretion may
permit such payment by delivery of shares of Common Stock or by delivery of
broker instructions authorizing payment to the Company of proceeds from the sale
of such shares.
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<PAGE> 19
Upon the grant of an option under the Plan, the person receiving the grant
(the "Option Holder") must enter into a written option agreement with the
Company that contains terms, provisions and conditions that are consistent with
the Plan and have been determined from time to time by the Committee. Incentive
Stock Options granted under the Plan may not expire later than ten years after
the date of grant, except that an Incentive Stock Option granted to an
individual owning (after the application of the family and other attribution
rules of Section 424(d) of the Code), at the time the option was granted, more
than 10% of the total combined voting power of all classes of stock of the
Company or of any of its subsidiaries (a "10% Stockholder"), may not expire
later than five years from the date the option is granted. The exercise price
for any Incentive Stock Option may not be less than 100% of the fair market
value of Common Stock of the Company on the date the Option is granted and the
exercise price of an Incentive Stock Option granted to a 10% Stockholder may not
be less than 110% of the fair market value of the Common Stock of the Company on
the date such option is granted. The Plan provides that the maximum number of
shares of Common Stock that may be issued pursuant to Incentive Stock Options,
in the aggregate, is 800,000 shares. The Board has approved an amendment,
subject to stockholder approval, to increase the number of shares which may be
issued pursuant to Incentive Stock Options by 1,000,000 shares to an aggregate
of 1,800,000 shares.
An Award granted under the Plan to an employee may include a provision
terminating the Award upon termination of employment under certain circumstances
or accelerating the receipt of benefits upon the occurrence of specified events,
such as a change of control of the Company or a dissolution, liquidation,
merger, reclassification, sale of substantially all of the property and assets
of the Company or other significant corporate transaction. Options granted to
Nonemployee Directors must be exercised by the fifth anniversary of the date of
grant if the grantee ceases to be a Director of the Company as a result of death
or disability, and the first anniversary after such grantee ceases to be a
Director for any other reason.
AWARDS TO NONEMPLOYEE DIRECTORS
Non-Qualified Stock Options to purchase 10,000 shares of Common Stock are
automatically granted to Nonemployee Directors upon their election to the Board.
Such options will vest in one-third annual installments, with the first
installment vesting on the first anniversary of the date of grant. Non-Qualified
Stock Options to purchase an additional 2,000 shares will be granted each year
commencing with the fourth anniversary of each Nonemployee Director's tenure,
provided such individual continues to serve as a director. Such options will be
fully vested and exercisable at the time of grant. All options granted to
Nonemployee Directors pursuant to the Plan have a ten-year term and an exercise
price equal to the fair market value of the shares on the date of grant of such
option. In addition, each Nonemployee Director receives an Annual Retainer to be
paid as follows: $11,000 in cash, or, at the option of a Nonemployee Director,
in Common Stock of the Company at a 20% discount off the price of the shares at
the closing price at the beginning of the year; and 500 shares of the Common
Stock of the Company per quarter.
FEDERAL INCOME TAX TREATMENT FOR THE PLAN
The following is a brief description of the federal income tax treatment
that will generally apply to Awards made under the Plan, based on federal income
tax laws in effect on the date hereof. The exact federal income tax treatment of
Awards will depend on the specific nature of the Award. Such an Award may,
depending on the conditions applicable to the Award, be taxable as an option, as
restricted or unrestricted stock, as a cash payment, or otherwise. Because the
following is only a brief summary of the general federal income tax rules,
recipients of Awards should not rely thereon for individual tax advice, as each
taxpayer's situation and the consequences of any particular transaction will
vary depending upon the specific facts and circumstances involved. EACH
RECIPIENT OF AN AWARD IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR FOR
PARTICULAR FEDERAL, AS WELL AS STATE AND LOCAL, INCOME AND ANY OTHER TAX ADVICE.
Incentive Stock Options
Pursuant to the Plan, participants who are employees may be granted
Incentive Stock Options. Generally, the optionee is not taxed and the Company is
not entitled to a deduction on the grant or the exercise of an
16
<PAGE> 20
Incentive Stock Option. However, if the optionee sells the shares acquired upon
the exercise of an Incentive Stock Option (the "Option Shares") at any time
within (a) one year after the date of transfer of shares to the optionee
pursuant to the exercise of such Incentive Stock Option or (b) two years after
the date of grant of such Incentive Stock Option, then (1) such optionee will
recognize capital gain in an amount equal to the excess, if any, of the sales
price over the fair market value of the Option Shares on the date of exercise,
(2) such optionee will recognize ordinary income in an amount equal to the
excess, if any, of the lesser of the sales price or the fair market value of the
Option Shares on the date of exercise, over the exercise price of such Incentive
Stock Option, (3) such optionee will recognize capital loss equal to the excess,
if any, of the exercise price of such Incentive Stock Option over the sales
price of the Option Shares. If the optionee sells the Option Shares at any time
after the optionee has held the Option Shares for at least (a) one year after
the date of transfer of the Option Shares to the optionee pursuant to the
exercise of the Incentive Stock Option and (b) two years after the date of grant
of the Incentive Stock Option, then the optionee will recognize capital gain or
loss equal to the difference between the sales price and the exercise price of
such Incentive Stock Option.
The amount by which the fair market value of Option Shares on the date of
exercise exceeds the exercise price will be included as a positive adjustment in
the calculation of an optionee's "alternative minimum taxable income" ("AMTI")
in the year of exercise. The "alternative minimum tax" imposed on individual
taxpayers is generally equal to the amount by which 28% (26% of AMTI below a
certain amount) of the individual's AMTI (reduced by certain exemption amounts)
exceeds his or her regular income tax liability for the year. A taxpayer's
alternative minimum tax attributable to such excess may be credited against the
taxpayer's regular tax liability in later years to the extent that the regular
tax liability exceeds the alternative minimum tax in any such year. Insiders (as
defined below) should consult their tax advisors concerning the possibility of
making an 83(b) Election (as defined below) upon the exercise of an Award.
Non-Qualified Stock Options
The grant of a Non-Qualified Stock Option is generally not a taxable event
for the optionee. Upon exercise of the option, the optionee will generally
recognize ordinary income in an amount equal to the excess of the fair market
value of the stock acquired upon exercise (determined as of the date of the
exercise) over the exercise price of such option. See, however, "Special Rules
for Awards Granted to Insiders," below. A subsequent sale of the Common Stock
generally will give rise to capital gain or loss equal to the difference between
the sales price and the sum of the exercise price paid for such shares plus the
ordinary income recognized with respect to such shares. If an optionee receives
a Non-Qualified Stock Option having an exercise price that is only a small
fraction of the value of the underlying Common Stock on the date of grant, such
optionee may be required to include the value of the option in taxable income at
the time of grant.
Special Rules for Awards Granted to Insiders
Special rules apply if the recipient of an Award is a director (including a
non-employee director), officer or stockholder subject to Section 16 of the
Exchange Act (an "Insider") and during any period of time a sale of the stock
acquired pursuant to an Award could subject such optionee to suit under Section
16. In such case, the determination of the amount and the timing of income
recognition in connection with the exercise of an option or the receipt of
Common Stock pursuant to other Awards, and the beginning of the holding period
for any Common Stock received, generally may be required to be deferred until
the expiration of any period during which the Insider would be restricted from
disposing of any stock received. An Insider may elect under Section 83(b) of the
Internal Revenue Code, as amended, within 30 days of the exercise date to
recognize ordinary income on the date of exercise (an "83(b) Election"), based
on the value of the Common Stock on that date. Insiders should consult their tax
advisors to determine the tax consequences to them of exercising Options granted
to them pursuant to the Plan, including the advisability of making the 83(b)
Election and the timing and manner of making such an election.
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<PAGE> 21
Miscellaneous Tax Issues
The tax consequences of Awards other than Incentive Stock Options and
Non-Qualified Stock Options depend on the specific nature and terms of such
Awards. The Company generally will be required to make arrangements for
withholding applicable taxes with respect to any ordinary income recognized by
an employee in connection with Awards made to such employee under the Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase Common Stock. Interest disallowed under this
rule may be carried forward to and deducted in later years, subject to the same
limitations.
Special rules will apply in cases where a recipient of an Award pays the
exercise or purchase price of the Award or applicable withholding tax
obligations under the Plan by delivering previously owned Common Stock or by
reducing the amount of Common Stock otherwise issuable pursuant to the Award.
The surrender or withholding of such shares will in certain circumstances result
in the recognition of income with respect to such shares.
The terms of the Awards may provide for accelerated vesting or payment in
connection with a change in ownership or control of the Company or its assets.
In that event and depending upon the individual circumstances of the recipient,
certain amounts with respect to such Awards may constitute "excess parachute
payments" under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payments" and the Company will be denied any deduction with respect to
such payment. Recipients of Awards should consult their tax advisors as to
whether accelerated vesting of an Award in connection with a change of ownership
or control of the Company or its assets would give rise to an excess parachute
payment.
APPLICATION OF CERTAIN LAWS
The acquisition of shares of Common Stock by directors, certain officers,
or 10% stockholders of the Company could be subject to the provisions of Section
16(b) of the Exchange Act under which a purchase of the Company's Common Stock
within six months before or after any sale of such stock could result in
recovery by the Company of all or a portion of any amount by which the sale
proceeds exceed the purchase price. Such officers, directors and 10%
stockholders are required to file reports of changes in beneficial ownership
under Section 16(a) of the Exchange Act. Rule 16b-3 under the Exchange Act
provides an exemption from Section 16(b) liability for certain transactions
pursuant to employee benefit plans. Officers, directors and 10% stockholders
should consult their counsel with respect to the effect of Section 16 upon their
participation in the Plan.
Resales of shares received on grants of Awards or purchased on exercise of
Awards by any person who has a control relationship with the Company may be
restricted under the provisions of the Securities Act and the rules and
regulations of the Commission, including Rule 144.
APPROVAL OF AMENDMENT TO 1993 EMPLOYEE
STOCK INCENTIVE PLAN, AS AMENDED
The Plan has previously received Board of Director and stockholder
approval. A total of 600,000 shares were originally reserved for issuance under
the Plan. In 1994 the Board of Directors and stockholders approved an amendment
to the Plan to increase the number of shares reserved for issuance thereunder by
400,000 shares, bringing the total number of shares issuable under the Plan to
1,000,000 shares, and to increase the number of shares which may be issued
pursuant to Incentive Stock Options by 400,000 shares to an aggregate of 800,000
shares. In 1994 the Board of Directors and stockholders also approved an
amendment to the Plan in order to comply with Section 162(m) of the Code by
limiting the number of shares of Common Stock subject to awards that may be
granted to any one employee during any calendar year and to add a requirement
that each member of the Committee be an "outside director" as that term is used
in Section 162(m) of the Code. In February 1998 the Board of Directors
authorized an amendment to the Plan, subject to stockholder
18
<PAGE> 22
approval, to increase the number of shares reserved for issuance thereunder by
1,000,000 shares, bringing the total number of shares issuable under the Plan to
2,000,000 shares, and to extend the duration of the Plan for a period of five
years, for a total duration of ten years since the initial adoption of the Plan.
In February 1998 the Board of Directors also authorized that the Plan be further
amended, subject to stockholder approval, to allow the grant of Awards to
consultants, to add a requirement that each member of the Committee be a
Nonemployee Director as that term is used in Rule 16b-3 and to eliminate
restrictions on the amendment of director stock option provisions.
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the Plan to (i) increase the number of shares
of Common Stock reserved for issuance thereunder by 1,000,000 shares, bringing
the total number of shares issuable under the Plan to 2,000,000 shares, (ii) to
extend the duration of the Plan for a period of five years, for a total duration
of ten years since the original adoption of the Plan, (iii) to allow the grant
of Awards to consultants, (iv) to limit the membership of the Committee to those
persons who are Nonemployee Directors as that term is used in Rule 16b-3, and
(v) to eliminate restrictions on the amendment of director stock option
provisions. The amendment to increase the number of shares issuable under the
Plan and to extend the duration of the Plan will enable the Company to continue
its policy of employee stock ownership as a means to attract and retain highly
qualified personnel, to motivate high levels of performance and to recognize key
employee accomplishments.
For a description of the principal features of the Plan, see "1993 Employee
Stock Incentive Plan, as Amended."
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The approval of the amendment to the Plan requires the affirmative vote of
a majority of the shares represented, in person or by proxy, and voting at the
Annual Meeting (which shares voting affirmatively also constitute at least a
majority of the required quorum).
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE PLAN
AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
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<PAGE> 23
PROPOSAL NO. 3
INDEPENDENT AUDITORS
For the 1997 fiscal year, KPMG Peat Marwick LLP provided audit services
which included examination of the Company's annual consolidated financial
statements. Upon the recommendation of the Audit Committee, the Board has
selected KPMG Peat Marwick LLP to provide audit services to the Company and its
subsidiaries for the fiscal year ending December 31, 1998. The stockholders are
being requested to ratify such selection at the Annual Meeting. A representative
of KPMG Peat Marwick LLP will attend the Annual Meeting to make any statements
he or she may desire and to respond to appropriate stockholder questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE ELECTION OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR 1999 ANNUAL MEETING
Any proposal relating to a proper subject which an eligible stockholder may
intend to present for action at the Company's 1999 Annual Meeting of
Stockholders and which such stockholder may wish to have included in the proxy
materials for such meeting in accordance with the provisions of Rule 14a-8
promulgated under the Exchange Act must be received as far in advance of the
meeting as possible in proper form by the Secretary of the Company at 495A S.
Fairview Avenue, Goleta, California 93117 and in any event not later than
December 5, 1998. It is suggested that any such proposal be submitted by
certified mail, return receipt requested.
OTHER BUSINESS OF THE ANNUAL MEETING
Management is not aware of any matters to come before the Annual Meeting or
any postponement or adjournment thereof other than the election of directors,
the proposal to amend the Plan and the ratification of the selection of the
Company's independent auditors. However, inasmuch as matters of which management
is not now aware may come before the meeting or any postponement or adjournment
thereof, the proxies confer discretionary authority with respect to acting
thereon, and the persons named in such proxies intend to vote, act and consent
in accordance with their best judgment with respect thereto, provided that, to
the extent the Company becomes aware a reasonable time before the Annual Meeting
of any matter to come before such meeting, the Company will provide an
opportunity to vote by proxy directly on such matter. Upon receipt of such
proxies in time for voting, the shares represented thereby will be voted as
indicated thereon and as described in this Proxy Statement.
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<PAGE> 24
MISCELLANEOUS
The solicitation of proxies is made on behalf of the Company and all the
expenses of soliciting proxies from stockholders will be borne by the Company.
In addition to the solicitation of proxies by use of the mails, officers and
regular employees may communicate with stockholders personally or by mail,
telephone, telegram or otherwise for the purpose of soliciting such proxies, but
in such event no additional compensation will be paid to any such persons for
such solicitation. The Company will reimburse banks, brokers and other nominees
for their reasonable out-of-pocket expenses in forwarding soliciting material to
beneficial owners of shares held of record by such persons.
BY ORDER OF THE BOARD OF DIRECTORS
DIANA M. WILSON
Chief Operating Officer,
Vice President and Secretary
Goleta, California
April 13, 1998
21
<PAGE> 25
PROXY
DECKERS OUTDOOR CORPORATION
495A S. Fairview Avenue
Goleta, California 93117
This Proxy is solicited on Behalf of the Board of Directors of Deckers Outdoor
Corporation. The undersigned hereby appoints Douglas B. Otto and Diana M.
Wilson, and each of them, as Proxies, each with the power to appoint his or her
substitute, and hereby authorized each of them to represent and to vote as
designated below, all the shares of common stock of Deckers Outdoor Corporation
held of record by the undersigned on March 27, 1998, at the Annual Meeting of
Shareholders to be held on May 15, 1998 and any postponements or adjournments
thereof.
PLEASE DATE, SIGN ON REVERSE SIDE AND RETURN IN THE ACCOMPANYING ENVELOPE.
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<PAGE> 26
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Please mark
your vote as [X]
indicated in
this example.
WITHHOLD
FOR AUTHORITY
the nominees to vote for the
listed below nominees listed below FOR AGAINST ABSTAIN
1. ELECTION OF CLASS II DIRECTORS: 2. To approve an
Instruction: To withhold authority [ ] [ ] amendment to the [ ] [ ] [ ]
to vote for a nominee listed below, Company's 1993
strike a line through the nominee's Employee Stock Incentive Plan, as amended
name. (the "Plan"), to (a) increase the number
of shares reserved for issuance thereunder
Nominees: Rex A. Licklider by 1,000,000 shares, (b) extend the duration
Karl F. Lopker of the Plan by five years and (c) modify
certain other provisions.
FOR AGAINST ABSTAIN
3. TO RATIFY THE
SELECTION OF KPMG [ ] [ ] [ ]
PEAT MARWICK LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
4. In their discretion, the Proxies are
authorized to vote upon such other business
as may properly come before such meeting or
any and all postponements or adjournments
thereof.
YES NO
Do You Plan to Attend the Meeting? [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY This proxy when properly executed will be
USING THE ENCLOSED ENVELOPE. voted in the manner directed herein by the
undersigned stockholder. If no direction is
made, the Proxies will vote for the nominees
listed above, for the approval of the amend-
ment to the 1993 Employee Stock Incentive
Plan, for the ratification of the selection
of KPMG Peat Marwick LLP as the Company's
independent auditor and in their discretion
on matters described in Item 4.
Signature(s) __________________________________________________________________________________ Dated ___________________, 1998
Please sign exactly as the name appears. When shares are held by joint tenants, both should sign. When signing as an attorney,
executor, administrator, trustee or guardian, please give your full title as such. If a corporation, please sign in full
corporate name by the President or other authorized officer. If a partnership, please sign in the partnership name by an
authorized person.
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</TABLE>
