<PAGE> 1
SCHEDULE 14A INFORMATION
INFORMATION 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:
<TABLE>
<S> <C>
/ / 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 Sec. 240.14a-11(c) or Sec. 240.14a-12
</TABLE>
Sun Sportswear, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
----------------------------------------------------------------------
(1) Amount Previously Paid:
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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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<PAGE> 2
SUN SPORTSWEAR, INC.
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 1995
To the Shareholders of
SUN SPORTSWEAR, INC.
Notice is hereby given that the Annual Meeting of Shareholders
for 1995 relating to the year ending December 31, 1994 (the "1995 Annual
Meeting") of SUN SPORTSWEAR, INC. (the "Company") will be held at 10:00 a.m. on
Thursday, May 25, 1995, at Sun Sportswear, Inc., 6520 South 190th Street, Kent,
Washington 98032 for the following purposes:
- - - To elect six Directors to hold office until the next annual meeting.
- - - To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on April
21, 1995 are entitled to notice of, and to vote, at the 1995 Annual Meeting and
any adjournment thereof.
By Order of the Board of Directors
/s/ Kevin C. James
---------------------------------
Kevin C. James
Senior Vice President,
6520 South 190th Street, Chief Financial Officer,
Kent, Washington 98032 and Secretary
April 21, 1995
- - -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED STAMPED ENVELOPE.
COMPLETING AND RETURNING THE PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE AT THE
ANNUAL MEETING IF THE PROXY IS REVOKED IN THE MANNER SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT.
- - --------------------------------------------------------------------------------
<PAGE> 3
SUN SPORTSWEAR, INC.
6520 SOUTH 190TH STREET
KENT, WASHINGTON 98032
PROXY STATEMENT
INFORMATION REGARDING PROXIES
This Proxy Statement and the accompanying proxy card are
furnished in connection with the solicitation of proxies by the Board of
Directors (the "Board") of SUN SPORTSWEAR, INC. (the "Company") for use at the
Annual Meeting of Shareholders relating to the fiscal year ending December 31,
1994 (the "1995 Annual Meeting") to be held on May 25, 1995, at 10:00 a.m. at
Sun Sportswear, Inc., 6520 South 190th Street, Kent, Washington 98032, and at
any adjournment or adjournments thereof. Only shareholders of record at the
close of business on April 21, 1995 (the "Record Date") will be entitled to
vote at the 1995 Annual Meeting. This Proxy Statement will be sent to
shareholders on or about April 28, 1995.
If the accompanying proxy is properly executed and returned,
the shares represented thereby will be voted in accordance with the
instructions specified thereon. Any proxy card signed and returned without any
direction given will be voted in accordance with the recommendation of the
Board. Any shareholder executing a proxy may revoke it at any time prior to
the voting thereof on any matter (without, however, affecting any vote taken
prior to such revocation) by delivering written notice to the Secretary of the
Company, by executing another proxy dated as of a later date or by voting in
person at the 1995 Annual Meeting. The principal executive offices of the
Company are located at 6520 South 190th Street, Kent, Washington 98032, and the
telephone number is (206) 251-3565.
2
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The only voting securities of the Company are shares of Common
Stock, no par value (the "Common Stock"). At April 7, 1995, there were issued
and outstanding 5,747,750 shares of Common Stock of the Company. The presence
in person or by proxy of holders of record of a majority of the outstanding
shares of Common Stock is required to constitute a quorum for the transaction
of business at the Annual Meeting. Under Washington State Law and the
Company's Articles of Incorporation, if a quorum is present at the Annual
Meeting: (i) the six nominees for election as directors who receive the
greatest number of votes cast for the election of directors by shares present
in person or represented by proxy at the meeting and entitled to vote shall be
elected directors. In the election of directors, any action other than a vote
for a nominee will have the practical effect of voting against the nominee.
INFORMATION REGARDING PRINCIPAL SHAREHOLDERS
The following table sets forth information, as of April 7,
1995, with respect to all shareholders known by the Company to be the
beneficial owners of more than five percent (5%) of its outstanding Common
Stock.
<TABLE>
<CAPTION>
Amount Percent of
Name and Address of Beneficial Ownership Class
- - --------------------------------------------------------------------------------------------
<S> <C> <C>
Seattle First National Bank 3,800,000 66.6%
701 Fifth Avenue, Floor 56
Seattle, Washington 98104
Dimensional Fund Advisors, Inc. 359,200 6.3%
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401
- - ---------------------------------------------------------------------------------------------
</TABLE>
ELECTION OF DIRECTORS
On March 1, 1995, the Company's Board of Directors, pursuant
to the Company's Bylaws, expanded the Board from 5 to 6 members and appointed
Paul R. Rollins, Jr. to the Board of Directors. Mr. Rollins is a Senior Vice
President and Manager of the Commercial Real Estate Division of the Company's
majority shareholder, Seafirst Bank.
The Board of Directors recommends the election of the
following six director nominees at the 1995 Annual Meeting, to hold office
until the next annual meeting and until their successors are elected and
qualified. The Board of Directors has unanimously approved each of the
nominees named below. Although the Board of Directors anticipates that all the
nominees will be available for election at the time election occurs, should any
one or more of them not accept nomination, or otherwise be unwilling or unable
to serve, it is intended that shares represented by proxy will be voted for the
election of another nominee to be designated by the Board of Directors to fill
such vacancy.
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<PAGE> 5
Larry C. Mounger, 57, was elected to the Company's Board of
Directors in April 1991, became Chairman and Chief Executive Officer in January
1993, and became President in January 1994. Mr. Mounger served as Chairman and
Chief Executive Officer and other positions of Pacific Trail Sportswear from
1955 to 1993. Pacific Trail is an outerwear garment company located in
Seattle, Washington that designs, manufactures and markets garments throughout
the United States. Mr. Mounger is a past President of the National Apparel and
Textile Association.
James H. Williams, 52, was appointed to the Company's Board of
Directors to fill a vacancy in January 1993, and elected to the Board in May
1993. Mr. Williams has been Executive Vice President - Bank of America (the
parent of Seafirst Bank) since 1994. Mr. Williams served as Chief Financial
Officer and Executive Vice President, and other positions, of Seafirst Bank
from 1973 until 1994. Prior to joining Seafirst, he worked as a budget analyst
at the U.S. Department of Agriculture in Washington, D.C.
James A. Walsh, 72, was elected to the Company's Board in May
1993. Mr. Walsh is the retired President of Allied Stores, the parent
corporation of the Bon Marche department store chain. Mr. Walsh served on the
Board of Directors of Security Pacific Bank, Washington, N.A., and its
predecessors from 1968 until 1992. In May of 1992, he was elected to the Board
of Directors of Seafirst Bank and stepped down from Seafirst's Board on March
18, 1993.
Robert A. Pene, 50, was elected to the Company's Board in May
1993. Mr. Pene has been a principal in Wiley, Pene and Company, a
turnaround-business building consultancy, since 1991. From 1983 to 1991 he was
President of Skyline Group, a consulting company similar to Wiley, Pene and
Company. Mr. Pene served as Vice President-Marketing for Frito Lay from 1981
to 1983, as Vice President of Marketing for Western Publishing Company (a
division of Mattel) from 1979 to 1981, as Director of Marketing for Kimberley
Clark Corporation from 1977 to 1979 and as Product Manager for Johnson's Wax
from 1973 to 1977.
L. Kaye Counts, 40, was elected to the Company's Board in May
1994, became Executive Vice President in February 1994, and has been Chief
Operating Officer of the Company since December 1990. Ms. Counts joined the
Company in June 1982 and served as custom sales manager and plant manager from
June 1982 to March 1984, as operations manager from March 1984 to December
1986, and as Vice President Operations from December 1986 through February
1994. Prior to joining Sun, she was production coordinator from 1980 to 1982
for Sunrise Design, Inc., a custom screen printing business located in Seattle.
Paul R. Rollins, Jr., 54, was appointed to the Company's Board
of Directors in March 1995, to fill a vacancy created when Sun's Board
unanimously voted to increase the size of the company's Board from five members
to six. Mr. Rollins is Senior Vice President and Commercial Real Estate
Division Manager for Seafirst Bank. Mr. Rollins has served as Senior Vice
President and other positions of Seafirst Bank since 1966.
4
<PAGE> 6
The following table shows the beneficial ownership reported to
the Company as of April 7, 1995, of Common Stock, including shares as to which
a right to acquire beneficial ownership exists within the meaning of Rule
13d-3(d) under the Securities Exchange Act (for example, through the exercise
of stock options), by the current directors, nominees and named executive
officers, and as a group.
<TABLE>
<CAPTION>
Shares
of Common Stock Percent of
BENEFICIAL OWNERSHIP AS OF APRIL 7, 1995 Beneficially Owned Class
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Larry C. Mounger - Chairman, President, CEO and Director 111,000(1) 1.9%
James H. Williams - Director 0
Paul R. Rollins, Jr. - Director 0
James A. Walsh - Director 6,000(2) *
Robert A. Pene - Director 6,000(3) *
L. Kaye Counts - Executive Vice President
Chief Operating Officer and Director 64,000(4) 1.1%
Sandra Teufel - Senior Vice President -
Women's and Girls' Division 33,400(5) *
Kenneth Schrang - Senior Vice President,
Men's and Boys' Division 3,800(6) *
All current directors and named executive officers
as a group (8 persons) 224,200 3.8%
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
(1) Includes 61,000 shares subject to stock options, under the
Employee Plan and the Director Plan, which are exercisable
within 60 days of this notice.
(2) Includes 6,000 shares subject to stock options, under the
Director Plan, which are exercisable within 60 days of this
notice.
(3) Includes 6,000 shares subject to stock options, under the
Director Plan, which are exercisable within 60 days of this
notice.
(4) Includes 63,000 shares subject to stock options, under the
Employee Plan, which are exercisable within 60 days of this
notice.
(5) Includes 33,000 shares subject to stock options, under the
Employee Plan, which are exercisable within 60 days of this
notice.
(6) Includes 3,750 shares subject to stock options, under the
Employee Plan, which are exercisable within 60 days of this
notice.
5
<PAGE> 7
BOARD OF DIRECTOR AND COMMITTEE MEETINGS
The business of the Company is managed under the direction of
the Board of Directors. The Board of Directors of the Company held a total of
ten meetings during the year ended December 31, 1994. All Board members
attended each of these meetings. The Board of Directors has a Compensation
Committee, an Audit Committee, and a Strategic Planning Committee described
below.
At April 10, 1995, the Audit Committee consisted of Messrs.
Rollins, Williams and Walsh, all independent, non-employee directors. The
function of the Audit Committee is to meet with the accounting staff of the
Company and the independent accountants engaged by the Company to review (i)
the scope and findings of the annual audit; (ii) accounting policies and
procedures and the Company's financial reporting; (iii) internal controls
employed by the Company; and (iv) the selection of the independent accountants
to serve as auditors of the Company. The Committee's findings and
recommendations are reported to the Board of Directors for appropriate action.
The Audit Committee held four meetings during 1994 and all Committee members
were in attendance at all meetings.
At April 10, 1995, the Compensation Committee consisted of
Messrs. Rollins, Williams and Walsh, all independent, non-employee directors.
See "Compensation Committee Interlocks and Insider Participation" below. The
function of the Compensation Committee is to establish and review the
compensation, including salaries and bonuses, of the executive officers and
senior management of the Company. Its activities are described in more detail
under "Report of the Compensation Committee of the Board of Directors" below.
The Committee's findings and recommendations are reported to the Board of
Directors for appropriate action. Further, the Compensation Committee
administers the Company's 1989 Employee Stock Option Plan. The Compensation
Committee held three meetings during 1994 and all Committee members attended
these meetings.
On April 10, 1995, the Company's Board of Directors created a
Strategic Planning Committee and appointed Messrs. Rollins, Williams and Walsh,
all non-employee directors, as members of the committee. The function of the
Strategic Planning Committee is to review and investigate all (1) requests
and/or proposals for the creation of a strategic alliance or partnership or
venture with the Company; (2) tender offers and/or other offers to purchase a
majority or controlling interest in the Company; (3) offers to swap or exchange
equity or debt securities of the Company with those of another company; and (4)
any and all other similar requests, offers or proposals. The Committee's
findings and recommendations are to be reported to the Board of Directors for
appropriate action.
The Board of Directors does not have a Nominating Committee.
Nominees for directors are selected by the Board as a whole.
STOCK OPTION PLANS
The following is a brief summary of the stock option plans in
effect under which directors, executive officers and employees of the Company
received or may receive benefits:
STOCK OPTION PLANS. In October 1989, the Company's Board of
Directors adopted, and Mr. David Sabey, at that time the Company's sole
shareholder, approved, the Company's 1989 Employee Stock Option Plan ("Employee
Plan") and the 1989 Director Stock Option Plan ("Director Plan") to attract and
retain key personnel and directors. A total of 400,000 shares of Common Stock
was originally reserved for issuance under
6
<PAGE> 8
the Employee Plan and a total of 60,000 shares was originally reserved for
issuance under the Director Plan. The Company's shareholders approved an
increase of 200,000 in the number of shares of Common Stock for which options
can be granted under the Employee Plan at the Company's May 20, 1994 Annual
Meeting. Any stockholder who desires to review the actual text of the Plans
may obtain copies by writing to the Company's Chief Financial Officer, at the
Company's principal offices.
EMPLOYEE PLAN. The Employee Plan provides for the grant of
both "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and non-qualified stock
options. All Company employees are eligible to participate in the Employee
Plan. The Employee Plan is administered by the Compensation Committee of the
Board of Directors, none of whom are eligible to participate in the Employee
Plan. The Committee determines the persons to be granted options, the number
of shares exercisable under each option, the exercise price and exercise
schedule, the manner in which payment may be made, and whether or not such
option is a non- qualified or incentive stock option. The exercise price may
not be less than 100% of the fair market value of the Common Stock on the date
of grant [110% of fair market value in the case of incentive stock options
granted to an individual then holding, directly or indirectly, more than ten
percent of the voting power of the Company's stock (a "ten percent
shareholder")]. "Fair market value" is defined by the Employee Plan as being
the closing sale price of Sun's stock on the option grant date, or if no sales
occurred on the option grant date, the bid price for that day as reported by
NASDAQ. In identifying the persons who are to receive options, the
Compensation Committee considers the person's position with the Company,
responsibilities, service, present and future value to the Company and other
relevant factors.
Options granted under the Employee Plan may not be exercisable
for more than a ten-year period from the date of grant (five years in the case
of incentive stock options granted to a ten-percent shareholder). Options
generally terminate three months after the optionee's termination of employment
from the Company for any reason other than death or disability, and are not
transferable by the optionee other than by will or the laws of descent and
distribution. In the case of death or disability, options terminate one year
after such event. The Employee Plan expires on October 2, 1999.
The Board may at any time terminate or amend the Employee
Plan, provided that without approval by the Company's shareholders there will
be: (i) no increase in the total number of shares covered by such Plan; and
(ii) no change in the class of persons eligible to receive options. In any
case, no termination or amendment may adversely affect any then-outstanding
option (or unexercised portion thereof) without the optionee's consent, unless
such amendment is required to enable the option to continue to qualify as an
incentive stock option.
DIRECTOR PLAN. Only non-employee directors of the Company are
eligible for participation in the Director Plan. All options granted under the
Director Plan are non-qualified stock options. The exercise price of options
granted under the Director Plan must be equal to the fair market value of
Common Stock on the date of grant. "Fair market value" is defined by the
Director Plan as being the closing sale price of Sun's stock on the option
grant date, or if no sales occurred on the option grant date, the bid price for
that day as reported by NASDAQ. The Director Plan is administered by a
committee or person appointed by the Board of Directors. The options granted
under the Director Plan become vested and exercisable one year from date of
grant. Upon initial election to the Board, each eligible new director
automatically receives an option grant to purchase 5,000 shares of Common
Stock. Upon subsequent re-election to the Board, each eligible incumbent
director automatically receives an option to purchase 1,000 shares of Common
Stock. The Director Plan expires October 2, 1999.
The Board may at any time terminate or amend the Director Plan,
provided that without approval by the Company's shareholders there will be: (i)
no increase in the total number of shares covered by such Plan; (ii) no
7
<PAGE> 9
change in the class of persons eligible to receive options; and (iii) no change
in the timing of grants of options. In any case, no termination or amendment
may adversely affect any then-outstanding option (or unexercised portion
thereof) without the optionee's consent.
At December 31, 1994, options to purchase an aggregate of
321,250 and 18,000 shares of Common Stock were outstanding under the Employee
and Director Plans, respectively, and a total of 140,625 shares and 42,000
shares, respectively, remained available for grant. These options were held by
43 individuals under the Employee Plan and three individuals under the Director
Plan. These options were exercisable at prices with a range of $3.25 to $6.00
per share.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
The following description of Federal income tax consequences
addresses the tax consequences for both "Incentive Stock Options" ("ISO") as
defined in Section 422 of the Code and "Non-Qualified Options" ("NQO"), and is
based on existing provisions of the Code and administrative or judicial
interpretations thereof. Legislative, administrative or judicial changes or
interpretations may occur which could modify such consequences. For this
reason, and because the tax consequences to each participant may depend largely
on the participant's individual circumstances, the Company urges each
participant in the Employee Plan or Director Plan to consult his or her own tax
advisor concerning the Federal, state and local tax consequences of the grant,
exercise or surrender of an option and the disposition of any stock acquired
pursuant to the exercise of an option.
EMPLOYEE PLAN. Incentive Stock Options - An employee
recognizes no income for Federal income tax purposes upon either the grant or
exercise of an ISO. However, the excess of the fair market value of the stock
at the exercise date over the exercise price is includable in the employee's
"alternative minimum taxable income" for purposes of the "alternative minimum
tax" ("AMT") (special rules apply in determining the amount includable for AMT
purposes in the case of employee-directors and certain officers). Each
employee's particular circumstances will determine whether the employee will
incur an AMT liability as the result of exercise of an ISO.
An employee generally will be entitled to long-term capital
gain treatment upon the sale of ISO shares if the shares are held for both the
following periods: (1) more than two years from the grant date; and (2) more
than one year after the shares are transferred to the employee. If shares are
sold or otherwise disposed of before those holding periods have expired (a
"disqualifying disposition"), the excess of the fair market value of the shares
at the time of exercise over the exercise price (but generally not more than
the amount of gain from the disposition) is taxable as ordinary income. (A
special rule governing the amount of ordinary income applies to
employee-directors and certain officers.) If gain on a disqualifying
disposition exceeds the amount treated as ordinary income, the excess is
taxable as capital gain, which is long-term if the shares have been held more
than one year on the date of disposition. Long-term capital gains of
individuals are currently taxed at a maximum Federal income tax rate of 28
percent, while short-term gains and ordinary income currently are subject to a
maximum Federal income tax rate of 39.6 percent.
The Company receives no deduction upon the grant or exercise
of an ISO but is entitled to a deduction equal to the amount of ordinary income
recognized by an employee upon a disqualifying disposition. Before making a
disqualifying disposition, the employee is required to notify the Company so
that the Company will know that the deduction is available.
Non-Qualified Stock Options - The grant of a NQO has no tax
effect on the employee or the Company. The consequences upon exercise of a NQO
depend upon whether the NQO shares are subject to a
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<PAGE> 10
"substantial risk of forfeiture". If the shares are not subject to a
substantial risk of forfeiture, then the optionee will recognize ordinary
income upon exercise to the extent that the fair market value of the shares on
the exercise date exceeds the exercise price. The "spread" is not taxed again
upon sale or disposition of the option shares; appreciation in the option
shares after the exercise date is not taxed until sale or exchange of the
shares, when it is taxable as capital gain which will be "long-term" if the
shares had a holding period of more than one year on the date of disposition.
The "spread" is deemed to be supplemental wages subject to withholding, whether
or not the optionee is an employee of the Company at the time of exercise. The
Company usually requires the employee to pay the Company the amount required to
be withheld by check at the time the option is exercised, but may make other
methods of payment available. Additional withholding may be required for state
income tax purposes.
If the shares are subject to a "substantial risk of
forfeiture" (including, in the case of employee-directors and certain officers,
limitations on resale imposed by Rule 16b-3 of the Securities and Exchange
Commission), then no income is recognized until the restrictions lapse [unless
the optionee elects within 30 days of acquiring the shares -- the "Section
83(b) election" -- to treat the shares as if they were unrestricted (see
above)]. The amount treated as ordinary income is the difference between the
fair market value and the exercise price on the date of lapse of the
restrictions. An employee's holding period in restricted stock for capital
gains purposes begins when the restrictions lapse.
Shares acquired by exercise of a NQO are not subject to the
two- and one-year ISO holding period requirements. Therefore, gain or loss
recognized upon sale or exchange of unrestricted option shares will be capital
gain or loss, which is long-term if the shares have been held for more than one
year at the date of sale or exchange. Gain on the sale of restricted shares
will be ordinary income unless a Section 83(b) election was made.
DIRECTOR PLAN. Only NQOs can be issued to directors under the
Director Plan. The Federal income tax consequences to a director and to the
Company resulting from the grant and exercise of a NQO under the Director Plan
are identical to the tax consequences of the grant and exercise of a NQO under
the Employee Plan, discussed above.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
COMPENSATION PRINCIPLES
The Company's executive compensation program has been designed
to:
1. Align the interest of executives with the interests of
shareholders by providing performance-based awards in cash and
by providing stock options.
2. Allow the Company to hire and retain the caliber of executives
needed to manage the Company, as well as to position it
strategically for the future.
The program consists of base salaries, annual cash bonuses,
and long-term equity incentives. At higher management levels, the mix of
compensation is weighted more heavily toward performance-based components -
annual cash bonuses and equity incentives. In developing compensation plans
and setting compensation levels, the Company has consulted with compensation
experts, reviewed prior years' compensation levels and levels of compensation
among its existing executives, and to a lesser extent, reviewed the published
pay practices of similar sized manufacturing companies and apparel businesses.
9
<PAGE> 11
The base salary level is vital to the Company's efforts to
attract and retain executives. For existing executives, base salary levels are
primarily the result of annual reviews of prior year salary levels, overall
company performance, past and expected individual contribution to overall
company performance, and to a lesser extent, annual reviews of published pay
practices of similar-sized manufacturing companies and apparel businesses.
For new executives, base salary levels are primarily the result
of reviews of the levels of compensation among the Company's existing
executives, compensation levels received by a new executive from previous
employers, and to a lesser extent, reviews of the published pay practices of
similar-sized manufacturing companies and apparel businesses.
The purpose of the annual cash bonus awards is to provide a
direct link between executive compensation and the Company's annual
performance. Generally, target annual performance levels for the Company are
established at the beginning of the year, and cash awards that reflect actual
Company performance results for the year (in relation to the target performance
levels) are paid after the year-end. The Company's annual performance is
primarily defined in terms of net income, and to a lesser extent by inventory
levels. The Board of Directors may increase the annual cash bonus awards paid
to specific executives - beyond that due according to the pre-defined formulas
- - - based upon a particular executive's individual performance.
Stock option awards under the Company's Employee Plan to
executives constitute the long-term equity incentive vehicle. The purpose of
these awards and grants is to strengthen the link between executives'
compensation and long-term Company stock performance. The stock option awards
are granted at the fair market value of the stock on the date of grant and have
a ten-year life. The Compensation Committee determines the vesting schedule.
In determining stock option awards, the Committee considers
the executive's contributions to past Company performance, the executive's
expected contributions toward meeting the Company's long-term strategic goals,
and prior year awards of stock options. Any value received by the executive
from a stock option award depends upon increases in the price of the Company's
stock. Consequently, the value of the compensation is directly aligned with
increased shareholder value.
1994 COMPENSATION OF EXECUTIVES OTHER THAN THE CHIEF EXECUTIVE OFFICER
For 1994, the Compensation Committee believed the Chief
Operating Officer's annual base salary to be adequate, so no increase was
provided. For 1994, the Senior Vice President - Women's and Girls' Division
received an increase in annual base salary from $135,000 to $175,000, primarily
as a result of the growth during 1993 and the expected growth of the Women's
and Girls' Division during 1994 (that division grew by 90% in 1994). Mr.
Schrang, the Senior Vice President - Men's and Boys' Division, was hired in
June 1994. His annual base salary was set at $150,000, primarily based on
compensation among the Company's existing executives and his prior compensation
level in his previous position.
For 1994, the Chief Operating Officer's annual cash bonus
award formula was based as follows: 75% on achievement of net income targets;
and 25% on achievement of inventory level targets. The 1994 annual cash bonus
awards for the Chief Operating Officer was paid based on the formula for 1994
(no discretionary award was paid). The Company's results were below the levels
at which a maximum annual bonus award would be paid to the Chief Operating
Officer, but above the threshold level necessary for a minimum award payment.
10
<PAGE> 12
For 1994, the Senior Vice President - Women's and Girls'
annual cash bonus was based as follows: 75% on achievement of gross profit
targets; and 25% on achievement of inventory level targets. As a result of the
Women's and Girls' divisions' favorable performance, the cash award paid to the
Senior Vice President - Women's and Girls' was increased by approximately 88%
(or $35,000) above the annual cash bonus award due based solely on the
pre-defined formula described above.
For 1994, Mr. Schrang, the Senior Vice President - Men's and
Boys', annual cash bonus was not based on a pre-defined formula. Rather, his
annual cash bonus for 1994 was based on the discretion of the Board of
Directors, and amounted to $45,000.
For 1994, the stock option awards to the Chief Operating
Officer and Senior Vice President - Women's and Girls' were based primarily on
the improved results achieved in 1993 versus 1992. For 1994, the stock option
award to Mr. Schrang, the Senior Vice President - Men's and Boys', was
primarily based on the awards to the Company's existing Executives.
1994 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
For 1994, the Compensation Committee believed the Chief
Executive Officer's salary to be adequate, so no increase was provided.
For 1994, the Chief Executive Officer's annual cash bonus
award formula was based as follows: 75% on achievement of net income targets;
and 25% on achievement of inventory level targets. The 1994 annual cash bonus
award for the Chief Executive Officer was paid based on the formula for 1994
(no discretionary award was paid). The Company's results were below the levels
at which a maximum annual bonus award would be paid to the Chief Executive
Officer, but above the threshold level necessary for a minimum award payment.
The 1994 stock option award to the Chief Executive Officer was
based primarily on the improved results achieved in 1993 versus 1992.
Compensation Committee,
Paul R. Rollins, Jr.
James H. Williams
James A. Walsh
11
<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth the annual, long-term, and
other compensation earned by the Company's Chief Executive Officer, and the
four highest-paid executive officers (the "named executive officers"), during
the Company's last three calendar years:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- - ----------------------------------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------
(a) (b) (c) (d) (e) (f)
Securities
Name and Underlying All Other
Principal Options Compen-
Position Year Salary($) Bonus($) (# of Shares) sation($)
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Larry C. Mounger 1994(1) $300,000 $ 89,295 10,000 $ -0-
Chairman, President and 1993 276,922 101,100 50,000 -0-
Chief Executive Officer
L. Kaye Counts 1994 $150,000 $ 29,752 10,000 $ 1,650(3)
Executive Vice President and 1993 150,000 50,000 10,000 1,800(3)
Chief Operating Officer 1992 150,000 -0- -0- 2,019(3)
Sandra L. Teufel 1994 $168,384 $ 75,000 25,000 $ 2,460(3)
Senior Vice President - 1993 128,333 50,000 15,000 2,075(3)
Women's and Girls' Division 1992 90,000 27,731 -0- 1,621(3)
Kenneth R. Schrang 1994(2) $ 75,577 $ 45,000 7,500 $ -0-
Senior Vice President -
Men's and Boys' Division
William Kennedy 1994(4) $ 73,925 $ -0- 7,500 $50,000
Senior Vice President -
Men's and Boys' Division
</TABLE>
(1) Mr. Mounger became an Executive Officer and employee in January 1993.
(2) Mr. Schrang became an Executive Officer and employee in July 1994.
(3) Represents company contribution to employee 401K plan.
(4) Mr. Kennedy resigned as an Executive Officer and employee in July 1994.
(5) Represents severance payments.
12
<PAGE> 14
The following table sets forth certain information concerning
stock options granted during 1994 to the named executive officers of the
Company:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
---------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
- - -----------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Name and Options Employees in Base Price Expiration
Position Granted(#) Fiscal Year ($/Share) Date 5%($) 10%($)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Larry C. Mounger 10,000(A)(B) 7.1% $5.88 5-22-04 $37,000 $ 93,700
Chairman, President
and Chief Executive Officer
L. Kaye Counts 10,000(A)(B) 7.1% $5.88 5-22-04 $37,000 $ 93,700
Executive Vice President
and Chief Operating Officer
Sandra L. Teufel 25,000(A)(B) 17.6% $5.88 5-22-04 $92,500 $234,250
Senior Vice President -
Women's and Girls' Division
Kenneth R. Schrang 7,500(A)(B) 5.3% $5.88 5-22-04 $27,750 $ 70,275
Senior Vice President -
Men's and Boys' Division
William Kennedy 7,500(A)(B)(C) 5.3% $5.88 5-22-04 $27,750 $ 70,275
Senior Vice President -
Men's and Boys' Division
</TABLE>
(A) These options were granted pursuant to the terms of the Company's
Employee Plan, under which the Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options. The options were granted for a
term of 10 years and two days, subject to earlier termination in
certain events related to termination of employment. The exercise
price and tax withholding obligations related to exercise may be paid
by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
(B) The options are 50% exercisable on May 20, 1995, and 100% exercisable
May 20, 1996.
(C) Mr. Kennedy resigned as an Executive Officer and employee in July
1994; all his stock options terminated upon his resignation.
13
<PAGE> 15
The following table summarizes options exercised during 1994
and presents the value of unexercised options held by the named executives at
December 31, 1994:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
(a) (b) (c) (d) (e)
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options Options
Shares at 12-31-94 (#) at 12-31-94 ($)
Acquired on Value Exercisable(E)/ Exercisable(E)/
Name and Position Exercise (#) Realized ($) Unexercisable(U) Unexercisable(U)
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Larry C. Mounger -0- -- 56,000 E $57,130 E
Chairman, President 10,000 U $ -0- U
and Chief Executive Officer
L. Kaye Counts -0- -- 53,000 E $59,240 E
Executive Vice President 15,000 U $ 5,000 U
and Chief Operating Officer
Sandra L. Teufel -0- -- 13,000 E $ 8,630 E
Senior Vice President - 32,500 U $ 7,500 U
Women's and Girls' Division
Kenneth R. Schrang -0- -- -0- E $ -0- E
Senior Vice President - 7,500 U $ -0- U
Men's and Boys' Division
William Kennedy (1) -0- -- -0- -0-
Senior Vice President -
Men's and Boys' Division
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Kennedy resigned as an Executive Officer and employee in July
1994; all his stock options terminated upon his resignation.
14
<PAGE> 16
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY, "STANDARD &
POORS COMPOSITE 500 STOCK INDEX" AND "INVESTOR'S BUSINESS DAILY TEXTILE-APPAREL
MANUFACTURING STOCK INDEX".
<TABLE>
<CAPTION>
01/01/90 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SUN SPORTSWEAR INC. 100 25 40 29 60 38
STANDARD & POOR'S 500 100 97 126 136 150 152
TEXTILE/APPAREL MFG. 100 73 121 142 113 98
</TABLE>
NOTES:
(1) Assumes that the value of the investment in Sun Common Stock and each
index was $100 on January 1, 1990 and that all dividends were
reinvested.
(2) The above data was furnished by "Investor's Business Daily".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Pene served on the Compensation Committee from the date of
his election to the Board of Directors in May 1993, until March 1995, at which
time he resigned from the Compensation Committee (in March 1995 the Company
engaged Mr. Pene and Mr. Pene's company, Wiley, Pene and Company, as
consultants to assist in its sales, sourcing, printing and distribution
re-engineering efforts). Mr. Pene was an independent, non-employee director
during his entire tenure on the Compensation Committee.
Messrs. Williams and Walsh have served on the Compensation
Committee from their election to the Board of Directors in May 1993 until
present. Messrs. Williams and Walsh are independent, non-employee directors.
Mr. Rollins was appointed to the Compensation Committee in April 1994. Mr.
Rollins is an independent, non-employee director.
The Company contemplates that, after the 1995 Annual Meeting,
the Compensation Committee will continue to consist of Messrs. Rollins,
Williams and Walsh.
15
<PAGE> 17
CHANGE OF CONTROL ARRANGEMENTS
In December 1992, Seafirst Bank, (Seafirst) acquired all
Common Stock in the Company owned by David A. Sabey, which represented 68% of
the shares outstanding, pursuant to a Loan Modification and Satisfaction
Agreement dated December 1992 by and among Mr. Sabey, Sabey Corporation, and
Seafirst (Mr. Sabey and Seafirst agreed to the partial discharge of a prior
loan to Mr. Sabey - unrelated to Sun - through the transfer of the Sun shares
to Seafirst). Under United States Federal banking regulations, Seafirst must
sell all of its interest in Sun by December 1997. Seafirst has not conveyed to
the Company a definite time-plan for the sale of its interest in Sun.
Presently, there are no "cash compensation" arrangements for Company management
personnel covering a future change of control of the Company.
EMPLOYMENT CONTRACTS
In May 1994, the Company and Mr. Mounger (the Company's
President and Chief Executive Officer) rescinded his prior Employment Agreement
and replaced it with an Employment Agreement which expires in January 1996.
The new Employment Agreement contains covenants which prevent Mr. Mounger from
hiring away the Company's employees, under certain circumstances in which his
employment is terminated, and provides for severance or disability benefits of
33% to 100% of his salary to be paid under certain circumstances in which his
employment is terminated.
In April 1994, the Company entered into an Employment
Agreement which expires in April 1996, with L. Kaye Counts, the Company's Chief
Operating Officer. This Employment Agreement contains covenants which prevent
this employee from hiring away the Company's employees, under certain
circumstances in which this individual's employment is terminated, and will
provide for severance or disability payments - of 33% to 100% of her salary -
to be paid under certain circumstances in which her employment is terminated.
The Company is presently negotiating an Employment Agreement
with the Company's Senior Vice President - Women's and Girls'.
DIRECTOR'S COMPENSATION
Currently, a director who is not also an employee or
consultant of the Company is paid a $10,000 annual retainer fee, $500 for each
Board of Directors meeting attended and $500 for each Committee meeting
attended. After each annual meeting of shareholders, each non- employee
incumbent director is granted options to purchase 1,000 shares of the Company's
Common Stock, which become exercisable one year from date of grant, and each
newly elected non-employee director is granted an option to purchase 5,000
shares of the Company's Common Stock, which will become exercisable one year
from the date of grant. During their entire tenure, Messrs. Williams and
Rollins have elected not to receive annual retainer fees, Board or committee
fees, or stock options for their services as Directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 require
the Company's officers, directors and persons who hold more than ten percent of
a registered class of the company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and
16
<PAGE> 18
greater-than-ten percent beneficial owners are required by the SEC regulation
to provide the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms provided to
the Company, or written representations that no Forms 5 were required, the
Company believes that during the fiscal year ended December 31, 1994, all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with: except that in
June 1994 a Form 4 was filed late for Ms. Counts reporting 500 shares of
common stock that were sold in February 1994; and in July 1994 a Form 4 was
filed late for Mr. Clark (a former Director and President, who resigned in
January 1994) reporting 12,200, 12,800, and 10,000 shares of common stock
acquired upon the exercise of Employee Plan Stock Options and sold in March
1994, May 1994 and June 1994, respectively.
CERTAIN TRANSACTIONS
Since December 1989, any new transactions between the Company
and officers, directors or shareholders owning 5% or more of the voting
securities of the Company, or affiliates of such persons, have been approved by
a majority of the disinterested directors. No such transaction has been or
will be approved unless those directors find that the proposed transaction is
no less favorable to the Company than would be available from independent third
parties.
The Company from time to time purchases garments from Major
League, Inc. In 1994, the Company purchased $90,346 of garments from Major
League, Inc. Mr. Schrang, a named executive officer, owns 33% of the common
stock of Major League, Inc.
INDEPENDENT ACCOUNTANTS
The Company has selected Price Waterhouse LLP to continue as
its principal independent accountants for the current year. Representatives of
Price Waterhouse LLP are expected to be present at the 1995 Annual Meeting to
respond to appropriate questions and will have an opportunity to make a
statement if they desire.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no
other business which will be presented for action at the 1995 Annual Meeting.
If any other business requiring a vote of the shareholders should come before
the 1995 Annual Meeting, the persons designated as your proxies will vote or
refrain from voting in accordance with their best judgment.
17
<PAGE> 19
SHAREHOLDER PROPOSALS
FOR THE 1996 ANNUAL MEETING OF SHAREHOLDERS
Written notice of proposals that shareholders wish to have
presented at the 1996 Annual Meeting of Shareholders relating to the fiscal
year ending December 31, 1995, must be delivered by the shareholder, either in
person or by registered or certified mail, postage prepaid, to the Secretary of
the Company at the Company's executive offices by December 29, 1995.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by
the Board of Directors of the Company. Proxies may be solicited by officers,
directors and regular supervisory and executive employees of the Company, none
of whom will receive any additional compensation for their services.
Solicitations of proxies may be made personally, or by mail, telephone,
telegraph or messenger. The Company will pay persons holding shares of Common
Stock in their names or in the names of nominees, but not owning such shares
beneficially, such as brokerage houses, banks and other fiduciaries, for the
expense of forwarding materials to their principals. All of the cost of
solicitation of proxies will be paid by the Company.
- - -----------------------------------------------------------------------------
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE CALENDAR YEAR 1994, AS FILED
WITH SECURITIES AND EXCHANGE COMMISSION, IS PRINTED AS PART OF THE COMPANY'S
ANNUAL REPORT TO SHAREHOLDERS, AND ACCOMPANIES THIS PROXY STATEMENT.
- - -----------------------------------------------------------------------------
By Order of the Board of Directors
/s/ Kevin C. James
Kevin C. James
Senior Vice President,
Chief Financial Officer
and Secretary
April 21, 1995
Kent, Washington
18
<PAGE> 20
<TABLE>
<S> <C>
SUN SPORTSWEAR, INC.
PROXY - 1995 6520 SOUTH 190TH STREET, KENT, WASHINGTON 98032 PROXY - 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints each of Larry C. Mounger and James H. Williams as Proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of Common Stock
of Sun Sportswear, Inc. held of record by the undersigned on April 21, 1995 at the 1995 Annual Meeting of Shareholders, relating
to the year ended December 31, 1994, to be held on May 25, 1995, or any adjournment thereof.
o ELECTION OF o FOR all nominees below (except o WITHHOLD AUTHORITY
DIRECTORS (check one): as marked to the contrary below) to vote for all nominees below.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
LARRY C. MOUNGER, JAMES H. WILLIAMS, JAMES A. WALSH, PAUL R. ROLLINS, JR.,
ROBERT A. PENE, L. KAYE COUNTS
o OTHER MATTERS: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the
meeting. (over)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
Please sign as name appears below. When shares are held by joint tenants, both should sign. When signing as an
attorney, executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full
by authorized officer. If a partnership, please sign in partnership name by authorized person.
Dated , 1995
--------------------
----------------------------------
Print Name
----------------------------------
Signature
----------------------------------
Print Name (if held jointly)
----------------------------------
Signature (if held jointly)
----------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
----------------------------------------------------------
</TABLE>
