SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
BRAZOS 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
BRAZOS SPORTSWEAR, INC.
3860 VIRGINIA AVENUE
CINCINNATI, OHIO 45227
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 16, 1997
Notice is hereby given that the annual meeting of the stockholders of
Brazos Sportswear, Inc. (the "Company") will be held at the offices of Equus II
Incorporated ("Equus II") at 2929 Allen Parkway, Suite 2500, Houston, Texas
77019 on Tuesday, September 16, 1997, at 10:00 a.m., Houston Time, for the
following purposes:
1. To elect a board of six directors to serve, until the next
annual meeting of stockholders or until their successors are elected
and qualify, or subject to adoption of the Charter Amendment (defined
below), for the relevant term established for the respective classes of
directors or until their successors are elected and qualified;
2. To consider and act upon the adoption of an amendment to
the Company's Restated Certificate of Incorporation to establish a
classified board of directors (the "Charter Amendment");
3. To consider and act upon the adoption of the 1997 Incentive
Plan (the "Plan"); and
4. To consider and act upon such other business as may
properly be presented to the meeting.
A record of stockholders has been taken as of the close of business on
August 18, 1997, and only those stockholders of record on that date will be
entitled to notice of and to vote at the meeting. A list of stockholders will be
available at the offices of the Company commencing September 5, 1997, and may be
inspected during normal business hours before the annual meeting.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE WHICH
HAS BEEN PROVIDED FOR YOUR CONVENIENCE. THE PROMPT RETURN OF PROXIES WILL ENSURE
A QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors,
/s/ F. CLAYTON CHAMBERS
F. CLAYTON CHAMBERS,
SECRETARY
August 29, 1997
<PAGE>
BRAZOS SPORTSWEAR, INC.
3860 VIRGINIA AVENUE
CINCINNATI, OHIO 45227
PROXY STATEMENT
This Proxy Statement is being mailed to stockholders commencing on or
about August 29, 1997, in connection with the solicitation by the board of
directors of Brazos Sportswear, Inc. (the "Company") of proxies to be voted at
the annual meeting of stockholders to be held at the offices of Equus II
Incorporated ("Equus II"), 2929 Allen Parkway, Houston, Texas 77019 on September
16, 1997, and any adjournment thereof, for the purposes set forth in the
accompanying notice. Proxies will be voted in accordance with the directions
specified thereon and otherwise in accordance with the judgment of the persons
designated as the holders of the proxies. Proxies marked as abstaining on any
matter to be acted on by the stockholders will be treated as present at the
annual meeting for purposes of determining a quorum but will not be counted as
votes cast on such matters. Any proxy on which no direction is specified will be
voted for the election of each of the directors nominated by the Company named
herein, or otherwise in accordance with the judgment of the person specified
thereon. A stockholder may revoke a proxy by delivering to the Company written
notice of revocation, delivering to the Company a proxy signed on a later date
or voting in person at the annual meeting.
OUTSTANDING VOTING SECURITIES
As of August 18, 1997, the record date for the determination of
stockholders entitled to vote at the annual meeting, there were 4,400,955 shares
of the common stock ("Common Stock") of the Company outstanding. Each share of
common stock entitles the holder to one vote on all matters presented at the
meeting. In addition, as of August 18, 1997, there were 2,682,787 shares of the
Series B-2 preferred stock of the Company ("Series B-2 Preferred Stock")
outstanding. The shares of Series B-2 Preferred Stock vote with the Common Stock
based on the number of shares of Common Stock into which such preferred stock is
then convertible. As of August 18, 1997, each share of Series B-2 Preferred
Stock is convertible into approximately .0909 shares of Common Stock, which on
an as-converted basis represents an aggregate of 243,889 shares of Common Stock.
ELECTION OF DIRECTORS
At the meeting, six nominees are to be elected, each director to hold
office until the next annual meeting of the stockholders, or if the Charter
Amendment is adopted, as set forth in the table below, or until his successor is
elected and qualified. The persons named in the accompanying proxy have been
designated by the board of directors and, unless authority is withheld, they
intend to vote for the election of the nominees named below to the board of
directors. Each of the nominees has previously served as a director of the
Company. If any nominee should become unavailable for election, the proxy may be
voted for a substitute nominee selected by the persons named in the proxy, or
the board may be reduced accordingly; however, the board of directors is not
aware of any circumstances likely to render any nominee unavailable.
The Charter Amendment, if approved by the stockholders, creates a
classified board of directors consisting of three classes. Each class is to be
as nearly equal in size as is practicable and each presently consists of two
directors. At the annual meeting, two directors will be elected to each of Class
I, Class II and Class III positions, with each Class I Director holding office
until the third annual meeting of stockholders following his election, each
Class II Director holding office until the second annual meeting of stockholders
following his election, and each Class III Director holding office until the
first annual meeting of stockholders following his election. Each director
elected after the initial term of any Class will be elected for a three-year
term.
<PAGE>
INFORMATION REGARDING THE NOMINEES
The following table contains certain information with respect to the
persons who have been nominated to serve as directors of the Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION AGE SINCE
- ---- -------- --- -----
<S> <C>
CLASS I DIRECTORS WHOSE TERM (IF ELECTED AND THE CHARTER AMENDMENT APPROVED) WILL EXPIRE IN 2000
Randall B. Hale......................... Director and chairman of the board 34 1997
J. Ford Taylor.......................... Director, president, and chief executive officer 40 1997
CLASS II DIRECTORS WHOSE TERM (IF ELECTED AND THE CHARTER AMENDMENT APPROVED) WILL EXPIRE IN 1999
Nolan Lehmann........................... Director 53 1997
F. Clayton Chambers..................... Director, vice president, chief financial officer, 37 1997
secretary and treasurer
CLASS III DIRECTORS WHOSE TERM (IF ELECTED AND THE CHARTER AMENDMENT APPROVED) WILL EXPIRE IN 1998
Alan B. Elenson......................... Director and president of Plymouth Mills 47 1997
Facility
Michael S. Chadwick..................... Director 45 1997
</TABLE>
For certain information regarding the beneficial ownership of the
Common Stock by each of the nominees, see "Other Information --Principal
Stockholders."
RANDALL B. HALE. Mr. Hale has been a director and chairman of the board
of the Company since March 1997, at which time BSI Holdings, Inc. ("BSI") merged
into the Company, and the Company changed its name to Brazos Sportswear, Inc. He
has served as a vice president of Equus II and Equus Capital Management Company
("Equus") since 1992 and a director of Equus since 1996. From 1985 to 1992, he
was employed by Andersen Worldwide. Mr. Hale is a director of American
Residential Services, Inc. and is also a director of numerous privately-owned
companies. Mr. Hale is a certified public accountant.
J. FORD TAYLOR. Mr. Taylor has been a president, chief executive
officer and a director of the Company since March 1997, and beginning in 1996
held the same positions with BSI. He was president of BSI's decorated sportswear
operations from 1995 until 1996 and vice president--operations of its decorated
sportswear operations from 1993 until 1995. Mr. Taylor served as president of
BSI's CC Creations and Red Oak facility in College Station, Texas from 1990 to
1993. He founded CC Creations in 1982 which he owned and operated before its
acquisition by BSI.
NOLAN LEHMANN. Mr. Lehmann has been a director of the Company since
1997. He has served as a director and president of Equus since 1980, and as a
director and president of Equus II since inception. Before joining Equus, Mr.
Lehmann served in a number of executive management positions with Service
Corporation International from 1973 to 1980. Mr. Lehmann is also a director of
Allied Waste Industries, Inc., American Residential Services, Inc., Drypers
Corporation and Garden Ridge Corporation. In addition, he serves as a director
of several privately-owned companies. Mr. Lehmann is a certified public
accountant.
F. CLAYTON CHAMBERS. Mr. Chambers has been a director of the Company
since 1997. He has served as vice president, chief financial officer, treasurer
and secretary of BSI from January 1995 until March 1997 and has served the
Company in the same capacity since that date, and previously served as a
consultant to BSI beginning in May 1994. Mr. Chambers was a principal in the
firm of Chadwick, Chambers & Associates, Inc., an investment and merchant
banking firm located in Houston, Texas, from 1988 until 1994. He was employed by
Lovett Mitchell Webb & Garrison, an investment banking firm, from 1986 until
1987.
ALAN B. ELENSON. Mr. Elenson has been a director of the Company since
1997. He founded Plymouth Mills, Inc. ("Plymouth") in 1975 and owned and
operated Plymouth before its acquisition by BSI in August 1996. Mr. Elenson is
president of the Company's Plymouth Mills operations.
MICHAEL S. CHADWICK. Mr. Chadwick has been a director of the Company or
its predecessors since 1997. He is a senior vice president and a managing
director of the corporate finance department of Sanders Morris Mundy, a
Houston-based financial services and investment banking firm ("SMM"). From 1988
2
<PAGE>
to 1994, Mr. Chadwick served as president of Chadwick, Chambers & Associates,
Inc., an investment and merchant banking firm located in Houston, Texas. Mr.
Chadwick presently serves on the Board of Directors of Watermarc Food Management
Company and Blue Dolphin Energy Company, both publicly traded corporations, and
Moody-Price, Inc., a privately-owned corporation.
VOTE REQUIRED FOR ELECTION AND RECOMMENDATION
The six nominees or, if the Charter Amendment is adopted, the two
nominees in each Class, for election as directors at the annual meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock (including Common Stock resulting from the deemed conversion of the Series
B-2 Preferred Stock as of the record date) of record shall be the duly elected
directors upon completion of the vote tabulation at the annual meeting, provided
a majority of the outstanding shares as of the record date are present in person
or by proxy at the meeting. Votes will be tabulated and the results certified by
the election inspector appointed by the Company who is required to resolve
impartially any interpretive questions as to the conduct of the vote. Under
applicable provisions of the Company's bylaws, any proxy containing an
abstention from voting for any nominee will be sufficient to represent the
shares at the meeting for purposes of determining whether a quorum is present,
but will count neither as a vote for nor against any nominee with respect to
whom the holder has abstained from voting. In tabulating votes, a record will be
made of the number of shares voted for each nominee, the number of shares with
respect to which authority to vote for that nominee has been withheld, and the
number of shares held of record by broker-dealers and present at the meeting but
not voting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL SIX NOMINEES OF THE
COMPANY TO THE BOARD OF DIRECTORS.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During 1996, the board of directors convened on seven regularly
scheduled occasions. Committees of the board held meetings as follows: audit
committee--four meetings and compensation committee--five meetings. Each
director attended at least 75% of all meetings of the board and all committees
on which he served during the year.
The Company's operations are managed under the broad supervision and
direction of the board of directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain board functions are discharged by the standing committees of the board.
The compensation committee is responsible for the formulation and adoption of
all executive compensation, benefit and insurance programs, subject to full
board approval where legally required, and supervises the administration of all
executive compensation and benefit programs, including the establishment of
specific criteria against which all annual performance based benefits are to be
measured. The audit committee assists the board in assuring that the accounting
and reporting practices of the Company are in accordance with all applicable
requirements. The current members of the compensation committee are Messrs.
Hale, Lehmann and Chadwick, and the current members of the audit committee are
Messrs. Hale, Chambers and Chadwick. The board of directors does not presently
maintain a nominating committee; stockholders who may wish to suggest
individuals for possible future consideration for board positions should direct
recommendations to the board of directors at the Company's principal offices.
Directors not employed by the Company ("Non-Employee Directors")
receive compensation of $16,000 annually for service on the board plus
reimbursement of expenses in attending meetings. In addition, if the Incentive
Plan is approved by the stockholders, each current Non-Employee Director and
those subsequently elected for the first time will receive a one-time grant of
options to purchase 15,000 shares of Common Stock (20,000 shares for the
chairman of the board), and beginning with the Company's 1998 annual meeting,
the Company anticipates that each Non-Employee Director will receive an
additional grant of options to purchase 5,000 shares of Common Stock on the date
of each stockholder vote regarding election of directors. All such options will
be granted at an exercise price per share equal to the fair market value of a
share of Common Stock on the date of grant.
3
<PAGE>
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock at August 18, 1997, by (i)
all directors, (ii) the chief executive officer and other executive officers,
(iii) each person who beneficially owns more than five percent of the Company's
common stock, and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES OF CLASS
---------------------- -----------
<S> <C> <C>
Equus II Incorporated .......................................................... 2,888,303(1) 56.3%
2929 Allen Parkway, Suite 2500
Houston, Texas 77019
Allied Investment Corporation .................................................. 342,938 7.8%
Allied Investment Corporation II
1666 K Street, N.W., Suite 901
Washington, D.C. 20006
Bank of America NW, N.A., d/b/a Seafirst Bank .................................. 307,552 7.0%
820 A Street, Suite 250
P.O. Box 1493
Tacoma, Washington 98401
George Warny ................................................................... 267,416(2) 6.0%
215 Flag Lake Drive
Clute, Texas 77531
Samuel T. McKnight ............................................................. 225,686(3) 5.1%
215 Flag Lake Drive
Clute, Texas 77531
Alan B. Elenson ................................................................ 232,575(4) 5.0%
330 Tompkins Avenue
Staten Island, New York 10304
J. Ford Taylor ................................................................. 225,811(5) 5.0%
3860 Virginia Avenue
Cincinnati, Ohio 45227
F. Clayton Chambers ............................................................ 251,546(6) 5.7%
3860 Virginia Avenue
Cincinnati, Ohio 45227
Michael S. Chadwick ............................................................ 268,436(7) 6.0%
3100 Texas Commerce Tower
Houston, Texas 77002
Randall B. Hale ................................................................ 2,923,467(8)(9) 56.6%
Nolan Lehmann .................................................................. 2,912,781(10)(8) 56.5%
All directors and executive officers as a group (six persons) .................. 3,926,313(1)(4)-(10) 69.4%
- -------------
</TABLE>
(1) Includes 170,839 shares which may be acquired upon exercise of warrants
and 557,156 shares issuable upon conversion of preferred stock.
(2) Includes 6,824 shares which may be acquired upon exercise of warrants
and 37,737 shares issuable upon conversion of preferred stock. Includes
106,116 shares as to which Mr. Warny serves as trustee and as to which
Mr. Warny disclaims beneficial ownership. Excludes 90,990 shares held
by trusts for the benefit of Mr. Warny's children and for which Mr.
McKnight serves as trustee and as to which Mr. Warny disclaims
beneficial ownership.
(Footnotes continue on next page)
4
<PAGE>
(3) Includes 33,084 shares issuable upon conversion of preferred stock and
includes 90,990 shares to which Mr. McKnight serves as trustee and as
to which Mr. McKnight disclaims beneficial ownership. Excludes 106,116
shares held by trusts for the benefit of Mr. McKnight's children and
for which Mr. Warny serves as trustee and as to which Mr. McKnight
disclaims beneficial ownership.
(4) Includes 232,575 shares that may be acquired upon exercise of warrants
and options. Includes 226,896 shares held jointly with, or separately
by, Joann Elenson, Mr. Elenson's spouse.
(5) Includes 96,213 shares that may be acquired upon exercise of warrants
and options and 30,504 shares issuable upon conversion of preferred
stock. Includes 121,296 shares held jointly by Sandra Taylor, Mr.
Taylor's spouse.
(6) Includes 27,963 shares that may be acquired upon exercise of warrants
and options and 22,186 shares issuable upon conversion of preferred
stock of which 5,041 shares and 2,438 shares upon conversion are held
in trust for Mr. Chambers' children.
(7) Includes 37,367 shares that may be acquired upon exercise of warrants
and options and 24,626 shares issuable upon conversion of preferred
stock.
(8) Includes 2,888,303 shares beneficially owned by Equus II; each holder
disclaims beneficial ownership of such shares.
(9) Includes 35,164 shares that may be acquired upon exercise of options.
(10) Includes 24,478 shares that may be acquired upon exercise of options.
EXECUTIVE OFFICER AND SIGNIFICANT EMPLOYEE TENURE AND IDENTIFICATION
The executive officers and significant employees serve at the pleasure
of the board of directors and are subject to annual appointment by the board at
its first meeting following the annual meeting of stockholders. Certain
information concerning significant employees of the Company who are not also
current members of the board of directors and nominees is set forth below:
ROBERT C. KLEIN. Mr. Klein has been president of the Morning Sun
facility since 1997. He served as president and chief executive officer of
Morning Sun, Inc. ("Morning Sun") before its acquisition by the Company in July
1997. From 1978 until 1993, Mr. Klein served in a variety of positions within
manufacturing, merchandising and sales at Jantzen, Inc., a division of VF Corp.,
and was vice president of womenswear before he left Jantzen, Inc. to join
Morning Sun.
LAURENCE E. CRABB. Mr. Crabb has been president of the Premier facility
since 1997. He founded Premier Sports Group, Inc. ("Premier") in 1986 and owned
and operated Premier before its acquisition by the Company. Mr. Crabb was
employed by Jansport from 1982 until 1986, where he had expanded
responsibilities for merchandising and sourcing production throughout Asia, with
an emphasis in China. He was employed by Levi Strauss and Company from 1977
until 1982, where he was responsible for sourcing production throughout Asia.
R. WAYNE HATCHER. Mr. Hatcher has been president of the CC Creations
and Red Oak facility since 1996. From 1985 to 1995, he served in a managerial
position with BSI and in 1995 was promoted to vice-president--operations of the
CC Creations and Red Oak facility. Mr. Hatcher was employed by Robinson Company,
a screen printer, from 1981 to 1985 and by a retail sporting goods and wholesale
sportswear store, Purvis Sportswear, from 1972 to 1981.
SAMUEL T. MCKNIGHT. Mr. McKnight has been president of the Company's
Blank Distribution Division since 1974. He founded Gulf Coast Sportswear, Inc.,
the predecessor of BSI, in 1974. From 1972 to 1974 Mr. McKnight served as
president of M & M Designs, a shirt printing company.
DEBORAH S. WILLIAMS. Ms. Williams has been president of the Company's
Cincinnati facility since 1996. She served as vice president of purchasing of
that facility from 1994 until 1996. From 1990 to 1994 Ms. Williams served as
director of purchasing of Velva Sheen, an operating division of American
Marketing Industries, Inc., which was acquired in November 1994 by the Company.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of the persons who
served as the Company's named executive officers at any time during its year
ending December 31, 1996. Each of Mr. William S. Wiley and Ms. L. Kaye Counts
and Sandra L. Teufel ceased their employment with the Company effective March
14, 1997, April 22, 1997 and December 31, 1996, respectively. In connection with
their termination, Mr. Wiley, Ms. Counts and Ms. Teufel received one-time
severance payments of $100,000, $50,000 and $37,500, respectively.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to
the Company for the periods indicated of each individual who was (i) the chief
executive officer at any time during the period or (ii) an executive officer at
December 31, 1996 whose annual compensation exceeded $100,000 (collectively, the
"Named Executives"). The share information gives effect to the five-for-one
reverse split pursuant to the Company's reincorporation in Delaware in March
1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------------------- ------------------
STOCK
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION (5)
- ---------------------------------- -------- ------------- ----------- ------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
William S. Wiley(1)............... 1996 $300,000 -0- -0- -0-
Chairman 1995 75,000 -0- -0- -0-
1994 -0- -0- -0- -0-
L. Kaye Counts(2)................. 1996 $175,000 -0- -0- $2,400
Executive vice president 1995 175,000 $29,752 -0- 2,068
and chief operating officer 1994 150,000 50,000 400 1,650
Sandra L. Teufel(3)............... 1996 $250,000 $65,524 -0- $2,400
Senior vice president - sales 1995 200,000 60,000 10,900 2,400
and marketing 1994 160,384 65,000 5,000 2,460
Charles Stempler.................. 1996 $115,769 -0- 1,000 -0-
Vice president - purchasing 1995 10,577 -0- -0- -0-
1994 -0- -0- -0- -0-
Michael Kovacs(4)................. 1996 $100,000 -0- -0- $1,650
Vice president - 1995 85,385 -0- -0- 1,431
manufacturing 1994 77,060 -0- 3,600 1,291
</TABLE>
(1) Ceased employment March 14, 1997.
(2) Ceased employment April 22, 1997.
(3) Ceased employment December 31, 1996.
(4) Ceased employment June 4, 1997.
(5) Annual contributions by the Company to a defined contribution plan
(401(k) plan).
6
<PAGE>
OPTION GRANTS
The following sets forth information concerning stock option grants
during 1996 to the Named Executives. The share information gives effect to the
five-for-one reverse split pursuant to the Company's reincorporation in Delaware
in March 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
-------------------------------------------------------------------------- ---------------------------
PERCENTAGE
OF
TOTAL
OPTIONS
GRANTED
TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED(2) IN 1996 PRICE DATE(3) 5% 10%
---- ---------- --------- ------- --------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles Stempler 1,000 47.6% $14.375 3/3/2007 $9,040 $22,910
</TABLE>
(1) Potential values stated are the result of using the SEC method of
calculations of 5% and 10% appreciation in value from the date of grant
to the end of the option term. Such assumed rates of appreciation and
potential realizable values are not necessarily indicative of the
appreciation, if any, which may be realized in future periods.
(2) The options were granted for a term of 10 years, subject to earlier
termination in certain events related to termination of employment.
(3) The options were 50% exercisable on March 1, 1997 and will be 100%
exercisable on March 1, 1998.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the
unexercised options to purchase shares of Common Stock for each of the Named
Executives held by them at December 31, 1996. None of the Named Executives
exercised any stock options during 1996, and no In-the-Money stock options were
outstanding as of December 31, 1996. The share information contained in the
table gives effect to the five-for-one reverse split pursuant to the Company's
reincorporation in Delaware in March 1997.
NUMBER OF UNEXERCISED
OPTIONS AT
DECEMBER 31, 1996
(SHARES)
--------------------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
L. Kaye Counts 13,600 -0-
Sandra L. Teufel 16,367 -0-
Charles Stempler -0- 1,000
Michael Kovacs 4,600 1,000
7
<PAGE>
BOARD REPORT ON EXECUTIVE COMPENSATION
On March 14, 1997, the Company merged with BSI Holdings, Inc. ("BSI").
In connection with the merger, all incumbent directors and executive officers of
the Company resigned, and as of the closing of the transaction, persons formerly
associated with BSI filled all company board and executive officer positions. As
such, the Board Report on Executive Compensation is provided by the
newly-appointed board of directors, which is unable to describe the prior
board's compensation policies or bases for the level of compensation provided to
the former chief executive officer or any of the other Named Executives for
1996.
The board of directors is of the view that base compensation for
executive officers should afford a reasonable degree of financial security and
flexibility to those individuals who are regarded by the board as acceptably
discharging the levels and types of responsibility implicit in the various
executive positions. The board of directors also believes that properly designed
and administered cash bonus and stock-based incentives for executives closely
align the executives' economic interests with those of stockholders and provide
a direct continuing focus upon the goal of constantly striving to increase
long-term stockholder value. These fundamental policies will be the basis of
compensation for executives in 1997.
The foregoing report is given by the entire board since the members of
the compensation committee of the board during 1996 are no longer directors of
the Company.
Randall B. Hale
J. Ford Taylor
Nolan Lehmann
Michael S. Chadwick
Alan Elenson
F. Clayton Chambers
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the yearly percentage change in the
cumulative total shareholder return on the Company's common stock, compared with
the cumulative total return on (i) the Standard & Poor's 500 Stock Index (the
"Standard & Poor's 500") and (ii) the Standard and Poor's Textiles Stock Index
(the "Textiles Index"), for the five years ended December 31, 1996:
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Brazos Sportswear, Inc. 100 73 146 95 64 41
Standard & Poor's 500 100 108 118 120 165 203
Textiles Index 100 106 80 79 89 122
</TABLE>
8
<PAGE>
In all cases, the cumulative total return assumes, as contemplated by
Securities and Exchange Commission rules, that any cash dividends on the common
stock of each entity included in the data presented above were reinvested in
that security.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
In August 1996, Brazos, Inc. ("Brazos") entered into a financial
advisory agreement with SMM in connection with the merger (the "Sun Merger") of
BSI Holdings, Inc. ("BSI") into the Company, formerly Sun Sportswear, Inc. Mr.
Chadwick is a senior vice president and a managing director of SMM and has been
a director of the Company or its predecessors since 1989. The agreement provided
for a success fee of approximately $160,000 based on the transaction price of
the Sun Merger in addition to $100,000 previously paid in financial advisory
fees.
In April 1997, the Company entered into a financial advisory agreement
with SMM pursuant to which SMM agreed to provide certain financial advisory
services to the Company. The agreement provides for payments to SMM in the
amount of $10,000 per month, for a period of 12 months, but the Company has the
right to terminate the agreement after the cumulative payment to SMM of $60,000.
SMM was also entitled to receive a lump sum success fee of $50,000 in connection
with the Company's acquisition of all of the capital stock of SolarCo. Inc., the
parent of Morning Sun (the "Morning Sun Acquisition"). In connection with the
public offering of 10 1/2% of Senior Notes due 2007 (the "Offering"), SMM
received an amount equal to the product of 0.25% multiplied by the gross
proceeds of the Offering, which amounted to $250,000. SMM agreed to forego,
after completion of the Offering, the $50,000 contingent lump sum success fee
payable by the Company in connection with the Morning Sun Acquisition.
Pursuant to an asset purchase agreement consummated in August 1996, the
Company acquired substantially all of the assets of Plymouth for approximately
$36 million (the "Plymouth Acquisition"). Upon consummation of the Plymouth
Acquisition, Mr. Elenson, the controlling shareholder of Plymouth, became a
director of BSI. As part of the purchase price for the acquisition of Plymouth's
assets, the Company agreed to pay certain contingent consideration of $8.2
million, including $2.95 million aggregate principal amount of junior
subordinated debentures maturing March 1999 and cash payments of $2.3 million
(paid in October 1996) and $2.95 million (which was paid upon consummation of
the Offering). The Company also issued to Plymouth junior subordinated
debentures in the principal amounts of $3.0 million and $4.5 million that
provide for periodic interest payments and that mature in December 1997 and
December 2003, respectively. Upon consummation of the Sun Merger, the $3.0
million junior subordinated debenture was repaid in full. Upon consummation of
the Offering, the $2.95 million junior subordinated debenture, the $2.95 million
contingent payment amount and the $4.5 million debenture were repaid in full.
To finance the Plymouth Acquisition, Brazos issued 2,500,000 shares of
its preferred stock and the Company issued warrants to purchase 66,511 shares of
the Company's common stock, at an exercise price of $.01 per share, for
aggregate consideration of $2,500,000. The Brazos preferred stock has been
converted into the same number of shares of Series B-2 Preferred Stock. The
Company warrants were exercised prior to the Sun Merger. Equus II holds
1,200,000 shares of Series B-2 Preferred Stock. Equus II also received warrants
to purchase 30,261 shares of the Company's common stock at an exercise price of
$4.62 per share.
In connection with the Plymouth Acquisition, SMM received warrants to
purchase 20,168 shares of the Company's common stock at an exercise price of
$4.62 per share. Of these warrants, 6,065 were assigned by SMM to Mr. Chadwick.
Mr. Chadwick holds 100,000 shares of Series B-2 Preferred Stock and exercised a
warrant to purchase 4,034 shares. Mr. Taylor (together with his spouse) and each
of Messrs. Warny and McKnight holds 75,000 shares of Series B-2 Preferred Stock
and exercised a warrant to purchase 3,025 shares of the Company's common stock
(with the warrant purchased by Mr. McKnight issued in the name of a trust for
the benefit of his children). Mr. Chambers holds 50,000 shares of Series B-2
Preferred Stock and exercised a warrant to purchase 2,016 shares of the
Company's common stock. In addition, Mr. Chambers, as trustee for two trusts
created for the benefit of his two children, holds 25,000 shares of Series B-2
Preferred Stock and exercised a warrant to purchase 1,008 shares of Company
common stock.
In connection with the Plymouth Acquisition, the following subordinated
debt of Brazos was converted into shares of BSI Series B preferred stock: Equus
II converted subordinated notes in the amount of $3,350,000 and $178,500 into
3,528,500 shares; each of Messrs. Warny and McKnight converted subordinated
notes in the amount of $234,392 and $29,750 into 264,142 shares; Mr. Chadwick
converted subordinated notes in the amount of $75,000 and $29,750 into 104,750
shares; Mr. Chambers converted subordinated notes in the amount of $75,000 and
$29,750 into 104,750 shares; and J. Ford and Sandra Taylor converted a note in
the amount of $190,000 into 190,000 shares. All of these shares were
subsequently exchanged for the same number of shares of Series B-1 Preferred
Stock pursuant to the Sun Merger.
In connection with the Sun Merger, the Company issued 2,000,000 shares
of Series B-3 Preferred Stock and warrants to purchase 36,000 shares of the
Company's common stock, at an exercise price of $50.00 per share, for aggregate
consideration of $2,000,000. These shares of preferred stock were subsequently
converted into the same number of shares of Series B-3 Preferred Stock of the
Company pursuant to the Sun Merger. The Company's warrants were converted into
warrants to purchase 272,968 shares of the Company's common stock at an exercise
price of $6.59 per share in connection with the Sun Merger. Equus II purchased
1,030,000 shares of Series B-3 Preferred Stock and a
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warrant to purchase 140,578 shares of the Company's common stock at a purchase
price of approximately $1.0 million. Mr. Taylor (together with his spouse) and
each of Messrs. Chadwick, Chambers and Warny purchased 50,000 shares of Series
B-3 Preferred Stock and a warrant to purchase 6,824 shares of the Company's
common stock at a price of $50,000.
Brazos leases a 88,625 square foot office and production facility in
College Station, Texas, from a partnership whose owners include corporations in
which Equus II and Messrs. Taylor, Chambers, Chadwick, McKnight and Warny have
an ownership interest. The two leases are for a ten-year term expiring 2002 and
provide for aggregate monthly lease payments of $18,500.
Management is of the opinion that all the transactions described were
on terms at least as favorable as could have been obtained from unaffiliated
third parties.
CHANGE IN CONTROL
On March 14, 1997, the Company, formerly Sun Sportswear, Inc., a
Washington corporation ("Sun"), consummated a merger (the "Merger") with BSI
Holdings, Inc. ("BSI"), with the Company being the surviving corporation.
Following the Merger, Sun was reincorporated in Delaware under the name of
"Brazos Sportswear, Inc. (the "Reincorporation"). Pursuant to the Merger and
Reincorporation, the former directors of BSI, with the addition of one executive
officer of BSI, became and currently serve as the directors of the Company. In
addition, Equus II, formerly the majority stockholder of BSI, acquired
beneficial ownership of 57.6% of the Common Stock of the Company. As of August
18, 1997, Equus II beneficially owned 56.3% of the Company's Common Stock. Equus
II received its beneficial ownership in the Company's Common Stock based on its
prior holdings of BSI capital stock and Sun capital stock surrendered in the
Merger and Reincorporation, respectively. Prior to the Merger and
Reincorporation, Bank of America NW, N.A., doing business as Seafirst Bank, was
Sun's majority stockholder.
AUDITORS
On May 12, 1997, the Company determined, pursuant to the authority and
approval of the board of directors, to dismiss Price Waterhouse LLP ("Price
Waterhouse"), the Company's independent accountants, who were previously engaged
as the independent accountant to audit the financial statements of the Company.
Price Waterhouse's report on the Company's financial statements for each of the
last two fiscal years did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles. During the Company's two most recent fiscal years and
subsequent interim period preceding the replacement of Price Waterhouse, there
were no disagreements with Price Waterhouse on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement(s), if not resolved to the satisfaction of Price
Waterhouse, would have caused them to make a reference to the subject matter of
the disagreement(s) in connection with its report. The Company has authorized
Price Waterhouse to respond fully to any inquiries by Arthur Andersen LLP.
On May 12, 1997, pursuant to the authority and approval of the
Company's board of directors, Arthur Andersen LLP ("Arthur Andersen") was
selected as the Company's independent accountants to audit the consolidated
statements of the Company for fiscal 1997. Arthur Andersen was previously
engaged as the independent accountant to audit the consolidated financial
statements of BSI.
While management anticipates that the Company's relationship with
Arthur Andersen will continue to be maintained during 1997, no formal action is
proposed to be taken at the annual meeting with respect to the continued
employment of Arthur Andersen inasmuch as no such action is legally required.
Representatives of Arthur Andersen, but not Price Waterhouse, plan to attend the
annual meeting and will be available to answer appropriate questions. Its
representatives also will have an opportunity to make a statement at the meeting
if they so desire, although it is not expected that any statement will be made.
The audit committee of the board of directors assists the board in
assuring that the accounting and reporting practices of the Company are in
accordance with all applicable requirements. The committee reviews with the
auditors the scope of the proposed audit work and meets with the auditors to
discuss matters pertaining to the audit and any other matter which the committee
or the auditors may wish to discuss. In addition, the audit committee would
recommend the appointment of new auditors to the board of directors if future
circumstances were to indicate that such action is desirable.
LIMITATION ON INCORPORATION BY REFERENCE
Notwithstanding any reference in prior or future filings of the Company
with the Securities and Exchange Commission which purports to incorporate this
proxy statement by reference into another filing, such incorporation does not
include any material included herein under the captions "Other
Information--Compensation Committee Report on Executive Compensation" or "Other
Information--Common Stock Performance Graph."
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SECTION 16(a) - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes of ownership with the Commission. With respect
to the year ended December 31, 1996, the Company believes that all filing
requirements applicable to the Company's executive officers, directors and 10%
shareholders have been met.
PROPOSAL TO ADOPT CHARTER AMENDMENT
BACKGROUND AND REASONS
The proposed Charter Amendment, if approved by the stockholders, would
establish a classified board of directors. A classified board will significantly
extend the time required to effect a change in control of the Company's board of
directors and may discourage hostile takeover bids for the Company. Currently, a
change in control of the Company's board of directors can be made by
stockholders holding a plurality of the votes cast at a single annual meeting.
If the Company implements a classified board of directors, it will take at least
two annual meetings for even a majority of stockholders to make a change in
control of the board of directors, because only a minority of the directors will
be elected at each meeting.
Under Delaware law, directors chosen to fill vacancies on a classified
board hold office until the next election of the class for which such directors
were chosen, and until their successors are elected and qualified. Delaware law
also provides that, unless the certificate of incorporation provides otherwise,
directors serving on a classified board of directors may be removed only for
cause. The Company's Certificate of Incorporation does not provide otherwise.
Accordingly, if the proposed Charter Amendment is approved by the stockholders,
conforming by-laws provisions will be implemented. Presently, all directors of
the Company are elected annually and all of the directors may be removed, with
or without cause, by a majority vote of the outstanding shares of the Company's
Common Stock. Cumulative voting is not authorized by the Company's Restated
Certificate of Incorporation.
The classified board proposal is designed to assure continuity and
stability in the Company's board of directors' leadership and policies. Although
management has not experienced any problems with such continuity in the past, it
wishes to ensure that this experience will continue. The board of directors also
believes that the proposed Charter Amendment will assist the board of directors
in protecting the interests of the Company's stockholders in the event of an
unsolicited offer for the Company.
Because of the additional time required to change control of the
Company's board of directors, the proposed Charter Amendment will tend to
perpetuate present management. Without the ability to obtain immediate control
of the board of directors, a takeover bidder will not be able to take action to
remove other potential impediments to its acquisition of the Company, including
the ability of the Company's board of directors to issue preferred stock of the
Company without further stockholder action. Because the proposed Charter
Amendment will increase the amount of time required for a takeover bidder to
obtain control of the Company without the cooperation of the board of directors,
even if the takeover bidder were to acquire a majority of the Company's
outstanding stock, it will tend to discourage certain tender offers, perhaps
including some tender offers that stockholders may feel would be in their best
interests. The proposed Charter Amendment will also make it more difficult for
the stockholders to change the composition of the Company's board of directors
even if the stockholders believe such a change would be desirable.
PROPOSED CHARTER AMENDMENT
The Charter Amendment, if approved by the stockholders, creates a
classified board of directors consisting of three classes. Each class is to be
as nearly equal in size as is practicable and each presently is to consist of
two directors. At the annual meeting, two directors will be elected to each of
Class I, Class II and Class III positions, with each Class I Director holding
office until the third annual meeting of stockholders following his election,
each Class II Director holding office until the second annual meeting of
stockholders following his election, and each Class III Director holding office
until the first annual meeting of stockholders following his election. Each
director elected after the initial term of any Class will be elected for a
three-year term.
REQUIRED AFFIRMATIVE VOTE AND RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's common stock (including shares of Common Stock resulting from the
deemed conversion of the Series B-2 Preferred Stock as of the record date)
outstanding and entitled to vote at the annual meeting is required to adopt the
Charter Amendment. The board of directors of the Company has declared the
Charter Amendment advisable and believes it is in the best interest of the
Company and its stockholders.
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THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT ITS
STOCKHOLDERS VOTE FOR THE CHARTER AMENDMENT.
PROPOSAL TO ADOPT 1997 INCENTIVE PLAN
GENERAL
Effective July 2, 1997, the board of directors adopted the 1997
Incentive Plan (the "Incentive Plan") and is submitting the Incentive Plan for
the approval of the Company's stockholders at the meeting. The Incentive Plan is
an amendment and restatement of the BSI 1995 Stock Incentive Plan (the "BSI
Plan") and the Sun 1989 Employee Stock Option Plan (the "Sun Plan"). On March
14, 1997, BSI merged with and into Sun, and Sun subsequently reincorporated in
Delaware under the name Brazos Sportswear, Inc. The Incentive Plan appears as
APPENDIX A to this proxy statement. The full text of the Incentive Plan is
incorporated herein by this reference, and the following summary is qualified in
its entirety by reference to the text of such Plan.
The board of directors believes that the adoption and approval of the
Incentive Plan is necessary as a result of the stage of development of the
Company, the number of its employees and its need to attract and retain key
personnel. The board of directors believes that the Incentive Plan will allow
the Company to continue to emphasize equity-based compensation in structuring
compensation packages for key employees, and to provide equity interests in the
Company to non-employee directors and consultants when deemed appropriate. The
board of directors believes that an emphasis on equity-based compensation will
yield the greatest benefit for the stockholders, as the compensation is directly
dependent on the return on stockholders' investments.
SUMMARY OF THE INCENTIVE PLAN
SHARES SUBJECT TO INCENTIVE PLAN. Under the Incentive Plan, the Company
may issue Incentive Awards covering an aggregate of the greater of (a) 750,000
shares of Common Stock and (b) 12.5% of the number of shares of Common Stock
issued and outstanding on the last day of each calendar quarter. No more than
750,000 shares of Common Stock shall be available for Incentive Stock Options.
At present, there are outstanding Options covering 571,285 shares of Common
Stock, leaving 178,655 shares of Common Stock available for issuance as
Incentive Awards under the Incentive Plan.
Any shares of Common Stock which were issued and have been forfeited or
were subject to Incentive Awards under the Plan which have expired or terminated
for any reason will remain available for issuance with respect to the granting
of Incentive Awards during the term of the Incentive Plan, except as may
otherwise be provided by applicable law. Shares of Common Stock received by the
Company in connection with the exercise of an Incentive Award shall also be
available for issuance under the Incentive Plan. The number and kind of
securities which may be issued under the Incentive Plan and pursuant to then
outstanding Incentive Awards are subject to adjustments to prevent enlargement
or dilution of rights resulting from stock dividends, stock splits,
recapitalizations, reorganizations or similar transactions.
ADMINISTRATION. The Incentive Plan is administered by the Committee
appointed by the board of directors, which is currently composed of Messrs.
Nolan Lehmann and Michael S. Chadwick. The Committee solely consists of
directors each of whom is (i) an "outside director" under Section 162(m) of the
Code and (ii) a "non-employee director" under Rule 16b-3 of the Exchange Act.
Subject to the express provisions of the Incentive Plan, the Committee is
authorized to, among other things, determine those eligible individuals to whom
Incentive Awards may be granted, grant Incentive Awards to individuals eligible
to participate in the Incentive Plan and determine the terms and conditions
(which need not be identical) of each Incentive Award. The Incentive Plan does
not prescribe any factors to be considered by the Committee in determining the
individual participants and types of Incentive Awards granted. The Committee
also interprets, construes and administers the Incentive Plan and any related
incentive agreements; and makes all of the determinations necessary or advisable
with respect to the Incentive Plan or any Incentive Award granted thereunder.
All decisions and determinations of the Committee are final and binding on all
parties.
Under the terms of the Incentive Plan, the Company will indemnify
members of the Committee against any cost, expenses or liability arising out of
any action, omission or determination relating to the Incentive Plan, unless
such action, omission or determination was taken or made with gross negligence
or willful misconduct.
ELIGIBILITY. Key employees, including officers (whether or not they are
directors), directors who are not employees, and consultants of the Company and
its subsidiaries are eligible to participate in the Incentive Plan.
TYPES OF INCENTIVE AWARDS. Under the Incentive Plan, the Committee
designated by the Board of Directors may grant (i) incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) "nonstatutory" stock options ("NSOs"), (iii) stock
appreciation rights ("SARs"), (iv) shares of restricted stock, (v) performance
shares and performance units, (vi) other stock-based awards, and (vii)
supplemental tax bonuses
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(collectively, "Incentive Awards"). ISOs and NSOs are sometimes referred to
collectively herein as "Options". A summary of the most significant features of
the Incentive Awards and their tax consequences to participants and the Company
is set out below.
GENERAL TERMS AND TAX INFORMATION RELATING TO INCENTIVE AWARDS. The
material terms of the Incentive Award, as determined by the Committee in its
discretion is reflected in an agreement (the "Incentive Agreement") between the
participant and the Company. A summary of the most significant features of the
Incentive Awards and their tax consequences to participants who are United
States persons and the Company is set out below.
INCENTIVE AND NONSTATUTORY STOCK OPTIONS. Except in limited cases
involving certain 10% stockholders or where the terms of the grant specify
otherwise, ISOs and NSOs must be exercised within ten years of the grant date.
ISOs may only be granted to employees and the exercise price of each ISO granted
may not be less than 100% (110% in the case of certain 10% shareholders) of the
fair market value of a share of Common Stock on the date of grant. The Committee
will have the discretion to determine the exercise price of each NSO granted
under the Incentive Plan; however, a NSO that is intended to qualify as
performance based compensation to an officer subject to Section 162(m) of the
Code must be granted with an exercise price equal to 100% of the fair market
value of a share of Common Stock on the grant date. To the extent that the
aggregate fair market value of shares of Common Stock with respect to which ISOs
are exercisable for the first time by any employee during any calendar year
exceeds $100,000, such options must be treated as NSOs.
The exercise price of each Option is payable in cash upon the exercise
of the Option or, in the discretion of the Committee and upon such terms and
conditions as it may deem appropriate, through the delivery of shares of Common
Stock owned by the Option holder and valued at their fair market value, by
withholding shares which would otherwise be acquired on the exercise of the
Option and having an aggregate fair market value equal to the total exercise
price or in a combination of the foregoing. The ability to pay the Option price
in surrendered or withheld shares of Common Stock will, if permitted by the
Committee, enable an Option holder to engage in a stock-for-stock exercise of an
Option and thereby exercise the Option with little or no cash investment.
If a participant's employment or other service with the Company is
terminated other than for Cause (as defined in the Incentive Plan), or by reason
of Disability (as defined in the Incentive Plan) or death, his vested Options,
whether ISOs or NSOs, shall remain exercisable for 60 days after such
termination. If a participant's employment or other service with the Company is
terminated by reason of Disability or death, his vested Options, whether ISOs or
NSOs, shall remain exercisable for one year following such termination. If an
employee's employment with the Company is terminated due to his retirement at or
after attaining age 65, his vested NSOs shall remain exercisable for six months,
and his vested ISOs shall remain exercisable for three months, following such
termination. No Option shall be exercisable after the expiration of its term, in
any case. If a participant's employment or other service with the Company is
terminated for Cause, all outstanding Options, whether vested or otherwise,
shall expire at the commencement of business on the date of such termination.
The Committee, in its discretion, may prescribe time periods different than
those set out in the foregoing provisions of this paragraph for the exercise of
Options following a participant's termination of employment or other service.
Such rights shall be reflected in the Incentive Agreement evidencing the
participant's Incentive Award.
Upon a Change in Control of the Company as defined in the Plan (a
"Change in Control"), all outstanding Options become immediately exercisable.
These provisions in the Incentive Plan providing for accelerated vesting upon a
Change in Control could in some circumstances have the effect of an
"antitakeover" defense because, as a result of these provisions, a Change in
Control of the Company could be more difficult or costly. This, however, is not
the Company's intention in adopting the Incentive Plan, as the purpose of the
Plan is to attract and retain qualified individuals to contribute to the future
success of the Company.
An employee who is a participant in the Incentive Plan will not
recognize any income at the time an ISO is granted, nor on the qualified
exercise of an ISO. If a participant does not dispose of the shares acquired by
exercise of an ISO within two years after the grant date of the ISO and one year
after the exercise of the ISO, the exercise is qualified and the gain or loss
(if any) on a subsequent sale will be a long-term capital gain or loss. Such
gain or loss equals the difference between the sum of the sales proceeds and the
exercise price of the Common Stock sold. The Company is not entitled to a tax
deduction as a result of the grant or qualified exercise of an ISO. However, if
the shares acquired upon the exercise of an ISO are disposed of at a gain prior
to the above one-year and two-year holding periods and the fair market value of
the shares at the time of exercise exceeds the exercise price, the exercise is
not qualified and special rules apply that require the participant to recognize
ordinary income (at least in part) at the time of such disposition. The Company
is generally entitled to a tax deduction at the same time and in the same amount
as the ordinary income recognized by the participant from such disposition.
Although the qualified exercise of an ISO will not produce ordinary
taxable income to the participant, it will produce an increase in the
participant's alternative minimum taxable income and may result in an
alternative minimum tax liability.
An optionee will not recognize any income for federal income tax
purposes at the time a NSO is granted, nor will the Company be entitled to a
deduction at that time. However, when any part of a NSO is exercised, the
optionee will
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recognize ordinary income in an amount equal to the difference between the fair
market value of the shares received and the exercise price of the NSO, and the
Company will generally recognize a corresponding tax deduction in the same
amount at the same time.
STOCK APPRECIATION RIGHTS (SARS). Upon exercise of a SAR, the holder
thereof will receive a number of shares of the Common Stock or cash, or a
combination thereof, as the Committee determines in the Incentive Agreement, the
aggregate value of which equals the amount by which the fair market value per
share of the Common Stock on the date of exercise exceeds the exercise price of
the SAR, multiplied by the number of shares underlying the exercised portion of
the SAR. A SAR may be granted in tandem with an Option or granted independently
of an Option. The grant price per share of any SAR will be established by the
Committee but must equal at least 100% of the fair market value of a share of
Common Stock on the date the SAR is granted. The term of each SAR will be fixed
by the Committee, but not extending beyond ten years from the date of grant.
SARs will be subject to such terms and conditions and will be exercisable at
such times as determined by the Committee. The value of an SAR may be paid in
cash, in shares of Common Stock, or in some combination, as determined by the
Committee. The Committee, in its discretion, will establish a participant's
right to exercise an SAR in the event the participant's employment is
terminated, such rights to be reflected in the participant's Incentive
Agreement. Upon a Change in Control of the Company, all outstanding SARs which
have not vested will fully vest automatically.
The exercise of a SAR will result in the recognition of ordinary income
by the participant on the date of exercise in the amount of cash, and/or the
fair market value on such date of the shares of Common Stock, acquired pursuant
to the exercise. The Company will generally be entitled to a tax deduction at
the same time and in the same amount as the ordinary income recognized by the
participant upon exercise of the SAR. The tax treatment of a SAR is the same
whether the SAR is exercised in conjunction with an ISO or a NSO.
RESTRICTED STOCK. A restricted stock award consists of a grant of
Common Stock to a participant, which is subject to substantial risk of
forfeiture and the transfer of which is subject to restrictions which lapse upon
the passage of time, the achievement of performance goals or upon the occurrence
of other events as determined by the Committee. This period of restriction is
established by the Committee at the time of grant. Unless otherwise designated
by the Committee, during the period of restriction a shareholder of restricted
shares will have all other rights of a shareholder, including the right to vote
the shares and receive the dividends paid thereon. The Committee, in its
discretion, will establish a participant's rights to receive restricted stock in
the event the participant's employment is terminated prior to vesting, such
rights to be reflected in the participant's Incentive Agreement. If vesting does
not occur, shares of restricted stock are forfeited. Upon a Change in Control of
the Company, all shares of restricted stock which have not vested or been
forfeited will vest automatically.
A participant will not recognize any income for federal tax purposes at
the time shares of restricted stock are granted or issued, nor will the Company
be entitled to a tax deduction at that time. However, when either the transfer
restriction or the forfeiture risk lapses, such as on vesting, the participant
will recognize ordinary income in an amount equal to the fair market value of
the shares of restricted stock on the date on which they vest. A participant may
file an appropriate election under Section 83(b) of the Code with the Internal
Revenue Service within 30 days of the issue date of the restricted stock (the
"Election"), which results in the participant's receipt of deemed ordinary
income in an amount equal to the fair market value of the shares of restricted
stock on the date on which they are issued. However, if a participant files the
Election and the restricted stock is subsequently forfeited, such participant is
not allowed a tax deduction for the amount previously reported as ordinary
income due to the Election. Gain or loss (if any) from a disposition of
restricted stock after the participant recognizes any ordinary income (whether
by vesting or an Election) will generally constitute short- or long-term capital
gain or loss. The Company will generally be entitled to a corresponding tax
deduction at the time the participant recognizes ordinary income on the
restricted stock, whether by vesting or an Election, in the same amount as the
ordinary income recognized by the participant.
PERFORMANCE UNITS AND PERFORMANCE SHARES. Performance units and
performance shares may be granted to eligible individuals at any time as
determined by the Committee. The Committee will have discretion to establish the
initial number and value of such units and shares, the performance period, and
the other material terms of the units or shares as reflected in the
participant's Incentive Agreement. The Committee will establish performance
goals in its discretion which, depending on the level of performance achieved,
will determine the number and/or value of performance units/shares earned. Where
an award is intended to meet the requirements for the performance-based
exception to the deductibility limit imposed by Section 162(m) of the Code, the
performance goals will be based on the performance measures prescribed in
regulations issued under Section 162(m). The value of a performance share or
unit (whether or not vested) is paid immediately on the occurrence of a Change
in Control of the Company.
There are no tax consequences to the Company or the participant upon
the grant of performance shares or units. Upon payout of the shares or units,
the participant will recognize taxable ordinary income in the amount of the
payout and the Company will receive a corresponding tax deduction in the same
amount and at the same time.
OTHER STOCK-BASED AWARDS. Other Stock-Based Awards, payable in Common
Stock, may be granted by the Committee and may be payable at such times and
subject to such conditions as the Committee determines, in its discretion,
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as reflected in the participant's Incentive Agreement. In order to enable the
Company and the Committee to respond quickly to significant developments in
applicable tax and other legislation and regulations and to trends in executive
compensation practices, the Incentive Plan also authorizes the Committee to
grant other stock-based awards to individuals eligible to participate in the
Incentive Plan. Other stock-based awards will consist of awards that are valued
in whole or in part by reference to, or otherwise based on, the Company's Common
Stock. Subject to the terms of the Incentive Plan, the Committee may determine
any terms and conditions of other stock-based awards. Payment or settlement of
other stock-based awards will be in cash or in shares of the Company's Common
Stock or in any combination thereof as the Committee determines in its
discretion.
Generally, a participant will not realize any income upon the grant of
other stock-based awards. Upon the payment of other stock-based awards, a
participant will realize compensation taxable as ordinary income, and the
Company will be entitled to a corresponding tax deduction in the same amount and
at the same time. However, if any such shares are subject to substantial
restrictions, such as a requirement of continued employment or the attainment of
certain performance objectives, the participant will not recognize income and
the Company will not be entitled to a deduction until the restrictions lapse,
unless the participant elects otherwise by filing an Election (as described
under "Restricted Stock" above). The amount of the participant's ordinary
taxable income and the Company's deduction will generally be the fair market
value of the shares at the time the restrictions lapse.
SUPPLEMENTAL TAX BONUSES. The Committee may grant, in connection with a
grant of an Incentive Award, a supplemental tax bonus, payable when the
participant is required to recognize ordinary income for federal income tax
purposes with respect to such Incentive Award. Receipt of any such bonus will
result in ordinary income to the participant and generally a corresponding tax
deduction to the Company at the same time and for the same amount.
OTHER TAX CONSIDERATIONS. Upon accelerated exercisability of Options
and accelerated lapsing of restrictions upon Restricted Stock or other Incentive
Awards in connection with a Change in Control of the Company, certain amounts
associated with such Incentive Awards could, depending upon the individual
circumstances of the recipient participant, constitute "excess parachute
payments" under the golden parachute provisions of Section 280G of the Code.
Pursuant to these provisions, a participant will be subject to a 20% excise tax
on any "excess parachute payment" (as defined in Section 280G of the Code) and
the Company will be denied any deduction with respect to such excess parachute
payment. The limit on the deductibility of compensation under Section 162(m) of
the Code is also reduced by the amount of any excess parachute payments. Whether
amounts constitute excess parachute payments depends upon, among other things,
the value of the Incentive Awards accelerated and the past compensation of the
participant.
Taxable compensation earned by certain named executive officers subject
to Section 162(m) of the Code in respect of Options, Restricted Stock,
performance shares or units, or other applicable Incentive Awards is intended to
constitute qualified "performance-based compensation". The Company should,
therefore, be entitled to a tax deduction for compensation paid in the same
amount as ordinary income is recognized by the officer without any reduction
under the limitations of Section 162(m) on deductible compensation paid to such
officers.
The foregoing federal income tax information is a summary only and does
not purport to be a complete statement of the relevant provisions of the Code.
The effect of any state or local taxes is not addressed.
INCENTIVE AWARDS NONTRANSFERABLE. No Incentive Award may be assigned,
transferred, pledged, or otherwise encumbered by a participant, other than by
will or by the laws of descent and distribution. An Incentive Award may be
exercised during the Participant's lifetime only by the participant or the
participant's legal representative.
AMENDMENT AND TERMINATION. The Company's board of directors may amend
or terminate the Incentive Plan at any time, except that the Incentive Plan may
not be modified or amended, without shareholder approval, if such amendment
would (i) increase the number of shares of Common Stock which may be issued
thereunder, except in connection with a recapitalization or reclassification of
the Common Stock, (ii) amend the eligibility requirements for individuals to
participate in the Incentive Plan, (iii) increase the maximum limits on
Incentive Awards that may be issued to certain named executive officers pursuant
to Section 162(m) of the Code, (iv) extend the term of the Incentive Plan, or
(v) decrease the authority granted to the Committee under the Incentive Plan in
contravention of Rule 16b-3 under the Exchange Act. No termination or amendment
of the Incentive Plan shall adversely affect in any material way any outstanding
Incentive Award previously granted to a participant without his consent.
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REQUIRED AFFIRMATIVE VOTE AND RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of
Common Stock (including shares of Common Stock resulting from the deemed
conversion of the Series B-2 Preferred Stock) entitled to vote at the meeting,
represented in person or by proxy, is required to approve the adoption of the
Incentive Plan. By affording key management employees, directors and consultants
of the Company and its subsidiaries an opportunity to acquire or increase their
proprietary interests in the Company, and by thus encouraging such individuals
to become owners of the Company's Common Stock, the Company seeks to motivate,
retain and attract those highly competent individuals upon whose judgment,
initiative, leadership and continued efforts the success of the Company in large
measure depends.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT ITS
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE INCENTIVE PLAN.
OTHER MATTERS
The annual report to stockholders covering the year ended December 31,
1996 either has been mailed to each stockholder entitled to vote at the annual
meeting or accompanies this proxy statement.
Any stockholder who wishes to submit a proposal for action to be
included in the proxy statement and form of proxy relating to the Company's 1998
annual meeting of stockholders is required to submit such proposal to the
Company on or before March 15, 1998.
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to solicitations by mail, several regular employees
of the Company may, if necessary to assure the presence of a quorum, solicit
proxies in person or by telephone.
The persons designated as proxies to vote shares at the meeting intend
to exercise their judgment in voting such shares on other matters that may
properly come before the meeting. Management does not expect that any matters
other than those referred to in this proxy statement will be presented for
action at the meeting.
By Order of the Board of Directors,
/s/F. CLAYTON CHAMBERS
F. CLAYTON CHAMBERS,
SECRETARY
August 29, 1997
<PAGE>
APPENDIX A
TO PROXY STATEMENT
BRAZOS SPORTSWEAR, INC.
1997 INCENTIVE PLAN
<PAGE>
BRAZOS SPORTSWEAR, INC.
1997 INCENTIVE PLAN
SECTION 1.
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 AMENDMENT AND RESTATEMENT
BSI Holdings, Inc. adopted and approved the BSI Holdings, Inc.1995
Stock Incentive Plan (the "BSI Plan"). Effective March 14, 1997, BSI Holdings,
Inc. amended the BSI Plan to allow the assumption of the outstanding stock
options under the BSI Plan, under the Sun Sportswear, Inc. 1989 Employee Stock
Option Plan (the "Sun Plan"), pursuant to the terms of that certain Plan and
Agreement of Merger dated November 13, 1996, as amended, between BSI Holdings,
Inc. and Sun Sportswear, Inc. (the "Merger Agreement"). On March 14, 1997, BSI
Holdings, Inc. merged with Sun and subsequently reincorporated as Brazos
Sportswear, Inc., a Delaware corporation (the "Company"). The Company now
desires to adopt this Brazos Sportswear, Inc. 1997 Incentive Plan (the "Plan")
as an amendment and restatement, in their entireties, of the BSI Plan and the
Sun Plan, effective as of July 2, 1997. All stock options previously granted
under the BSI Plan and the Sun Plan shall be assumed and continued for all
purposes under this Plan.
1.2 PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of the Company and its Subsidiaries and to increase
stockholder value by: (a) encouraging the commitment of selected key Employees,
Consultants and Outside Directors, (b) motivating superior performance of key
Employees, Consultants and Outside Directors by means of long-term performance
related incentives, (c) encouraging and providing key Employees, Consultants and
Outside Directors with a program for obtaining ownership interests in the
Company which link and align their personal interests to those of the Company's
stockholders, (d) attracting and retaining key Employees, Consultants and
Outside Directors by providing competitive incentive compensation opportunities,
and (e) enabling key Employees, Consultants and Outside Directors to share in
the long-term growth and success of the Company.
The Plan provides for payment of various forms of incentive
compensation and, therefore, is not intended to be a plan that is subject to the
Employee Retirement Income Security Act of 1974, as amended (ERISA). The Plan
shall be interpreted, construed and administered consistent with its status as a
plan that is not subject to ERISA.
Subject to approval by the Company's stockholders pursuant to SECTION
7.1, the Plan shall become effective as of July 2, 1997 (the "EFFECTIVE DATE").
The Plan, as an amendment and restatement of the BSI Plan and the Sun Plan,
shall commence on the Effective Date, and shall remain in effect, subject to the
right of the Board to amend or terminate the Plan at any time pursuant to
SECTION 7.13, until all Shares subject to the Plan have been purchased or
acquired according to its provisions. However, in no event may an Incentive
Award be granted under the Plan after the expiration of ten (10) years from the
Effective Date. Any Incentive Award granted prior to the Effective Date will be
subject to the subsequent receipt of stockholder approval of the Plan.
1.3 DEFINITIONS
The following terms shall have the meanings set forth below:
(a) APPRECIATION. The difference between the option exercise
price per share of the Nonstatutory Stock Option to which a Tandem SAR
relates and the Fair Market Value of a share of Common Stock on the
date of exercise of the Tandem SAR.
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(b) AUTHORIZED OFFICER. The Chairman of the Board or the Chief
Executive Officer of the Company or any other senior officer of the
Company to whom either of them delegate the authority to execute any
Incentive Agreement for and on behalf of the Company. No officer or
director shall be an Authorized Officer with respect to any Incentive
Agreement for himself.
(c) BOARD. The Board of Directors of the Company.
(d) CAUSE. When used in connection with the termination of a
Grantee's Employment, shall mean the termination of the Grantee's
Employment by the Company by reason of (i) the conviction of the
Grantee by a court of competent jurisdiction as to which no further
appeal can be taken of a crime involving moral turpitude or a felony;
(ii) the proven commission by the Grantee of an act of fraud upon the
Company; (iii) the willful and proven misappropriation of any funds or
property of the Company by the Grantee; (iv) the willful, continued and
unreasonable failure by the Grantee to perform the material duties
assigned to him; (v) the knowing engagement by the Grantee in any
direct, material conflict of interest with the Company without
compliance with the Company's conflict of interest policy, if any, then
in effect; (vi) the knowing engagement by the Grantee, without the
written approval of the Board, in any activity which competes with the
business of the Company or which would result in a material injury to
the business, reputation or goodwill of the Company; or (vii) the
knowing and intentional engagement in any activity which would
constitute a material violation of the provisions of the Company's
policies and procedures manual, if any, then in effect.
(e) CHANGE IN CONTROL. Any of the events described in and
subject to SECTION 6.7.
(f) CODE. The Internal Revenue Code of 1986, as amended, and
the regulations and other authority promulgated thereunder by the
appropriate governmental authority. References herein to any provision
of the Code shall refer to any successor provision thereto.
(g) COMMITTEE. A committee appointed by the Board consisting
of not less than two directors who fulfill the "non-employee director"
requirements of Rule 16b-3 under the Exchange Act and the "outside
director" requirements of Section 162(m) of the Code. Without
limitation, the Committee may be the Compensation Committee of the
Board, or any subcommittee of the Compensation Committee, provided that
the members of the Committee satisfy the requirements of the previous
sentence. The Board shall have the power to fill vacancies on the
Committee arising by resignation, death, removal or otherwise. The
Board, in its sole discretion, may bifurcate the powers and duties of
the Committee among one or more separate committees, or retain all
powers and duties of the Committee in a single Committee. The members
of the Committee shall serve at the discretion of the Board.
Notwithstanding the preceding paragraph of this definition,
the term "Committee" as used in the Plan may also, as to any given
Incentive Award, refer to the Board to the extent that the Board, in
its discretion, elects to grant the Incentive Award including, without
limitation, the grant of an Incentive Award to an Outside Director who
is a member of the Committee. In the case of such a grant by the Board,
the Board shall have all the powers and responsibilities of the
Committee hereunder as to the Incentive Award so granted, and any
actions as to such Incentive Award may be acted upon only by the Board
(unless it otherwise designates in its discretion). If and when the
Board exercises its authority to act in the capacity as the Committee
hereunder, it shall so designate in writing with respect to any action
that it undertakes in its designated capacity as the Committee. The
Board shall not act in the capacity as the Committee hereunder with
respect to any particular action under the Plan to the extent that
doing so would cause an Employee to fail to qualify for an exemption
from liability under Section 16(b) of the Exchange Act, violate the
rules of any stock exchange on which the Common Stock is then listed or
traded, or result in the non-deductibility of compensation pursuant to
Section 162(m) of the Code.
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(h) COMMON STOCK. The common stock of the Company, $.001 par
value per share, and any class of common stock into which such common
shares may hereafter be converted, reclassified or recapitalized.
(i) COMPANY. Brazos Sportswear, Inc., a corporation organized
under the laws of the State of Delaware, and any successor in interest
thereto.
(j) CONSULTANT. An independent agent, consultant, attorney or
other individual who is not an Outside Director or employee of the
Company (or any Parent or Subsidiary) and who, in the opinion of the
Committee, is in a position to contribute materially to the growth or
financial success of the Company (or any Parent or Subsidiary).
(k) COVERED EMPLOYEE. A named executive officer who is one of
the group of covered employees as defined in Section 162(m) of the Code
and Treasury Regulation ss. 1.162-27(c) (or its successor).
(l) DEFERRED STOCK. Shares of Common Stock to be issued or
transferred to a Grantee under an Other Stock-Based Award granted
pursuant to SECTION 5 at the end of a specified deferral period, as set
forth in the Incentive Agreement pertaining thereto.
(m) DISABILITY. As determined by the Committee in its
discretion exercised in good faith, a physical or mental condition of
the Employee that would entitle him to payment of disability income
payments under the Company's long term disability insurance policy or
plan for employees, as then effective, if any; or in the event that the
Grantee is not covered, for whatever reason, under the Company's
long-term disability insurance policy or plan, "Disability" means a
permanent and total disability as defined in Section 22(e)(3) of the
Code. A determination of Disability may be made by a physician selected
or approved by the Committee and, in this respect, the Grantee shall
submit to an examination by such physician upon request.
(n) EMPLOYEE. Any employee of the Company (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code who, in
the opinion of the Committee, is one of a select group of executive
officers, other officers, or other key personnel of the Company (or any
Parent or Subsidiary), who is in a position to contribute materially to
the growth and development and to the financial success of the Company
(or any Parent or Subsidiary), including, without limitation, officers
who are members of the Board.
(o) EMPLOYMENT. Employment by the Company (or any Parent or
Subsidiary), or by any corporation issuing or assuming an Incentive
Award in any transaction described in Section 424(a) of the Code, or by
a parent corporation or a subsidiary corporation of such corporation
issuing or assuming such Incentive Award, as the parent-subsidiary
relationship shall be determined at the time of the corporate action
described in Section 424(a) of the Code. In this regard, neither the
transfer of a Grantee from Employment by the Company to Employment by
any Parent or Subsidiary, nor the transfer of a Grantee from Employment
by any Parent or Subsidiary to Employment by the Company, shall be
deemed to be a termination of Employment of the Grantee. Moreover, the
Employment of a Grantee shall not be deemed to have been terminated
because of absence from active Employment on account of temporary
illness or during authorized vacation or during temporary leaves of
absence from active Employment granted for reasons of professional
advancement, education, health, or government service, or during
military leave for any period (if the Grantee returns to active
Employment within 90 days after the termination of military leave), or
during any period required to be treated as a leave of absence by
virtue of any applicable statute or agreement.
Unless otherwise provided in the Incentive Agreement, the term
"Employment" for purposes of the Plan will also include compensatory
services performed by a Consultant for the Company (or any Parent or
Subsidiary) as well as membership on the Board by an Outside Director.
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(p) EXCHANGE ACT. The Securities Exchange Act of 1934, as
amended.
(q) FAIR MARKET VALUE. The fair market value of one share of
Common Stock on the date in question, which is deemed to be (i) the
closing sales price on the immediately preceding business day of a
share of Common Stock as reported on the principal securities exchange
on which Shares are then listed or admitted to trading, or (ii) if not
so reported, the average of the closing bid and asked prices for a
Share on the immediately preceding business day as quoted on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the
closing bid and asked prices for a Share as quoted by the National
Quotation Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If there was no public
trade of Common Stock on the date in question, Fair Market Value shall
be determined by reference to the last preceding date on which such a
trade was so reported.
If the Common Stock is not traded in accordance with clauses
(i), (ii) or (iii) of the preceding paragraph at the time a
determination of its Fair Market Value is required to be made
hereunder, the determination of Fair Market Value for purposes of the
Plan shall be made by the Committee in its discretion exercised in good
faith. In this respect, the Committee may rely on such financial data,
valuations or experts as it deems advisable under the circumstances.
(r) GRANTEE. Any Employee, Consultant or Outside Director who
is granted an Incentive Award under the Plan.
(s) INCENTIVE AWARD. A grant of an award under the Plan to a
Grantee, including any Nonstatutory Stock Option, Incentive Stock
Option, Reload Option, Stock Appreciation Right, Restricted Stock
Award, Performance Unit, Performance Share, or Other Stock-Based Award,
as well as any Supplemental Payment.
(t) INCENTIVE AGREEMENT. The written agreement entered into
between the Company and the Grantee setting forth the terms and
conditions pursuant to which an Incentive Award is granted under the
Plan, as such agreement is further defined in SECTION 6.1(a).
(u) INCENTIVE STOCK OPTION. A Stock Option granted by the
Committee to an Employee under SECTION 2 which is designated by the
Committee as an Incentive Stock Option and intended to qualify as an
Incentive Stock Option under Section 422 of the Code.
(v) INDEPENDENT SAR. A Stock Appreciation Right described in
SECTION 2.5.
(w) INSIDER. An individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of
the Company's equity securities that is registered pursuant to Section
12 of the Exchange Act, all as defined under Section 16 of the Exchange
Act.
(x) NONSTATUTORY STOCK OPTION. A Stock Option granted by the
Committee to a Grantee under SECTION 2 which is not designated by the
Committee as an Incentive Stock Option.
(y) OPTION PRICE. The exercise price at which a Share may be
purchased by the Grantee of a Stock Option.
(z) OTHER STOCK-BASED AWARD. An award granted by the Committee
to a Grantee under SECTION 5.1 that is valued in whole or in part by
reference to, or is otherwise based upon, Common Stock.
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(aa) OUTSIDE DIRECTOR. A member of the Board who is not, at
the time of grant of an Incentive Award, an employee of the Company or
any Parent or Subsidiary.
(bb) PARENT. Any corporation (whether now or hereafter
existing) which constitutes a "parent" of the Company, as defined in
Section 424(e) of the Code.
(cc) PERFORMANCE-BASED EXCEPTION. The performance-based
exception from the tax deductibility limitations of Section 162(m) of
the Code, as prescribed in Code ss. 162(m) and Treasury Regulation ss.
1.162- 27(e) (or its successor).
(dd) PERFORMANCE PERIOD. A period of time determined by the
Committee over which performance is measured for the purpose of
determining a Grantee's right to and the payment value of any
Performance Unit, Performance Share or Other Stock-Based Award.
(ee) PERFORMANCE SHARE OR PERFORMANCE UNIT. An Incentive Award
representing a contingent right to receive cash or shares of Common
Stock (which may be Restricted Stock) at the end of a Performance
Period and which, in the case of Performance Shares, is denominated in
Common Stock, and, in the case of Performance Units, is denominated in
cash values.
(ff) PLAN. The Brazos Sportswear, Inc.1997 Incentive Plan as
set forth herein and as it may be amended from time to time.
(gg) RESTRICTED STOCK. Shares of Common Stock issued or
transferred to a Grantee pursuant to SECTION 3.
(hh) RESTRICTED STOCK AWARD. An authorization by the Committee
to issue or transfer Restricted Stock to a Grantee.
(ii) RESTRICTION PERIOD. The period of time determined by the
Committee and set forth in the Incentive Agreement during which the
transfer of Restricted Stock by the Grantee is restricted.
(jj) RETIREMENT. The voluntary termination of Employment from
the Company or any Parent or Subsidiary constituting retirement for age
on any date after the Employee attains the normal retirement age of 65
years, or such other age as may be designated by the Committee in the
Employee's Incentive Agreement..
(kk) SHARE. A share of the Common Stock of the Company.
(ll) SHARE POOL. The number of shares authorized for issuance
under SECTION 1.4, as adjusted for awards and payouts under SECTION 1.5
and as adjusted for changes in corporate capitalization under SECTION
6.5.
(mm) SPREAD. The difference between the exercise price per
Share specified in any Independent SAR grant and the Fair Market Value
of a Share on the date of exercise of the Independent SAR.
(nn) STOCK APPRECIATION RIGHT OR SAR. A Tandem SAR described
in SECTION 2.4 or an Independent SAR described in SECTION 2.5.
(oo) STOCK OPTION OR OPTION. Pursuant to SECTION 2, (i) an
Incentive Stock Option granted to an Employee, or (ii) a Nonstatutory
Stock Option granted to an Employee, Consultant or Outside Director,
whereunder the Grantee has the right to purchase Shares of Common
Stock. In accordance with Section 422 of the Code, no Consultant or
Outside Director shall be granted an Incentive Stock Option.
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(pp) SUBSIDIARY. Any corporation (whether now or hereafter
existing) which constitutes a "subsidiary" of the Company, as defined
in Section 424(f) of the Code.
(qq) SUPPLEMENTAL PAYMENT. Any amount, as described in
SECTIONS 2.7, 3.5, 4.2 AND/OR 5.2, dedicated to payment of income taxes
that are payable by the Grantee on an Incentive Award.
(rr) TANDEM SAR. A Stock Appreciation Right that is granted in
connection with a related Stock Option pursuant to SECTION 2.4, the
exercise of which shall require forfeiture of the right to purchase a
Share under the related Stock Option (and when a Share is purchased
under the Stock Option, the Tandem SAR shall similarly be canceled).
1.4 PLAN ADMINISTRATION
(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by
law and subject to the provisions herein, the Committee shall have full
power to (i) select Grantees who shall participate in the Plan; (ii)
determine the sizes, duration and types of Incentive Awards; (iii)
determine the terms and conditions of Incentive Awards and Incentive
Agreements; (iv) determine whether any Shares subject to Incentive
Awards will be subject to any restrictions on transfer; (v) construe
and interpret the Plan and any Incentive Agreement or other agreement
entered into under the Plan; and (vi) establish, amend, or waive rules
for the Plan's administration. Further, the Committee shall make all
other determinations which may be necessary or advisable for the
administration of the Plan.
(b) MEETINGS. The Committee shall designate a chairman from
among its members who shall preside at all of its meetings, and shall
designate a secretary, without regard to whether that person is a
member of the Committee, who shall keep the minutes of the proceedings
and all records, documents, and data pertaining to its administration
of the Plan. Meetings shall be held at such times and places as shall
be determined by the Committee and the Committee may hold telephonic
meetings. The Committee may take any action otherwise proper under the
Plan by the affirmative vote, taken with or without a meeting, of a
majority of its members. The Committee may authorize any one or more of
their members or any officer of the Company to execute and deliver
documents on behalf of the Committee.
(c) DECISIONS BINDING. All determinations and decisions made
by the Committee shall be made in its discretion pursuant to the
provisions of the Plan, and shall be final, conclusive and binding on
all persons including the Company, its shareholders, Employees,
Grantees, and their estates and beneficiaries. The Committee's
decisions and determinations with respect to any Incentive Award need
not be uniform and may be made selectively among Incentive Awards and
Grantees, whether or not such Incentive Awards are similar or such
Grantees are similarly situated.
(d) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. Subject to
the stockholder approval requirements of SECTION 7.7 if applicable, the
Committee may, in its discretion, provide for the extension of the
exercisability of an Incentive Award, accelerate the vesting or
exercisability of an Incentive Award, eliminate or make less
restrictive any restrictions contained in an Incentive Award, waive any
restriction or other provisions of an Incentive Award, or otherwise
amend or modify an Incentive Award in any manner that is either (i) not
adverse to the Grantee to whom such Incentive Award was granted or (ii)
consented to by such Grantee. The Committee may grant an Incentive
Award to an individual who it expects to become an Employee within the
next six months, with such Incentive Award being subject to such
individual actually becoming an Employee within such time period, and
subject to such other terms and conditions as may be established by the
Committee in its discretion.
(e) DELEGATION OF AUTHORITY. The Committee may delegate to the
Chief Executive Officer and to other senior officers of the Company its
duties under this Plan pursuant to such conditions or limitations as
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the Committee may establish from time to time, except that the
Committee may not delegate to any person the authority to grant
Incentive Awards to, or take other action with respect to, Grantees who
are subject to Section 16 of the Exchange Act or Section 162(m) of the
Code.
(f) EXPENSES OF COMMITTEE. The Committee may employ legal
counsel, including, without limitation, independent legal counsel and
counsel regularly employed by the Company, and other agents as the
Committee may deem appropriate for the administration of the Plan. The
Committee may rely upon any opinion or computation received from any
such counsel or agent. All expenses incurred by the Committee in
interpreting and administering the Plan, including, without limitation,
meeting expenses and professional fees, shall be paid by the Company.
(g) SURRENDER OF PREVIOUS INCENTIVE AWARDS. The Committee may,
in its absolute discretion, grant Incentive Awards to Grantees on the
condition that such Grantees surrender to the Committee for
cancellation such other Incentive Awards (including, without
limitation, Incentive Awards with higher exercise prices) as the
Committee directs. Incentive Awards granted on the condition precedent
of surrender of outstanding Incentive Awards shall not count against
the limits set forth in SECTION 1.4 until such time as such previous
Incentive Awards are surrendered and cancelled.
(h) INDEMNIFICATION. Each person who is or was a member of the
Committee, or of the Board, shall be indemnified by the Company against
and from any damage, loss, liability, cost and expense that may be
imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may
be a party or in which he may be involved by reason of any action taken
or failure to act under the Plan, except for any such act or omission
constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of
any judgment in any such action, suit, or proceeding against him,
provided he shall give the Company an opportunity, at its own expense,
to handle and defend the same before he undertakes to handle and defend
it on his own behalf. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Articles of Incorporation
or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
1.5 SHARES OF COMMON STOCK AVAILABLE FOR INCENTIVE AWARDS
Subject to adjustment under SECTION 6.5, there shall be available for
Incentive Awards under this Plan granted wholly or partly in Common Stock
(including rights or Options that may be exercised for or settled in Common
Stock) an aggregate of the greater of (a) 750,000 Shares of Common Stock and (b)
12.5% of the number of Shares of Common Stock issued and outstanding on the last
day of each calendar quarter. No more than 750,000 Shares of Common Stock shall
be available for Incentive Stock Options. The number of Shares of Common Stock
that are the subject of Incentive Awards under this Plan, that are forfeited or
terminated, expire unexercised, are settled in cash in lieu of Common Stock or
in a manner such that all or some of the Shares covered by an Incentive Award
are not issued to a Grantee or are exchanged for Incentive Awards that do not
involve Common Stock, shall again immediately become available for Incentive
Awards hereunder. The Committee may from time to time adopt and observe such
procedures concerning the counting of Shares against the Plan maximum as it may
deem appropriate. The Board and the appropriate officers of the Company shall
from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that Shares are available for issuance pursuant to
Incentive Awards.
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Unless and until the Committee determines that a particular Incentive
Award granted to a Covered Employee is not intended to comply with the
Performance-Based Exception, the following rules shall apply to grants of
Incentive Awards to Covered Employees:
(a) Subject to adjustment as provided in SECTION 6.5, the
maximum aggregate number of Shares of Common Stock (including Stock
Options, SARs, Restricted Stock, Performance Units and Performance
Shares paid out in Shares, or Other Stock-Based Awards paid out in
Shares) that may be granted or that may vest, as applicable, in any
calendar year pursuant to any Incentive Award held by any individual
Covered Employee shall be two million (2,000,000) Shares.
(b) The maximum aggregate cash payout (including SARs,
Performance Units and Performance Shares paid out in cash, or Other
Stock-Based Awards paid out in cash) with respect to Incentive Awards
granted in any calendar year which may be made to any Covered Employee
shall be five million dollars ($5,000,000).
(c) With respect to any Stock Option or Stock Appreciation
Right granted to a Covered Employee that is canceled or repriced, the
number of Shares subject to such Stock Option or Stock Appreciation
Right shall continue to count against the maximum number of Shares that
may be the subject of Stock Options or Stock Appreciation Rights
granted to such Covered Employee hereunder and, in this regard, such
maximum number shall be determined in accordance with Section 162(m) of
the Code.
(d) The limitations of subsections (a), (b) and (c) above
shall be construed and administered so as to comply with the
Performance-Based Exception.
1.6 SHARE POOL ADJUSTMENTS FOR AWARDS AND PAYOUTS.
The following Incentive Awards and payouts shall reduce, on a one Share
for one Share basis, the number of Shares authorized for issuance under the
Share Pool:
(a) Stock Option;
(b) SAR (except a Tandem SAR);
(c) Restricted Stock;
(d) A payout of a Performance Share in Shares;
(e) A payout of a Performance Unit in Shares; and
(f) A payout of an Other Stock-Based Award in Shares.
The following transactions shall restore, on a one Share for one Share
basis, the number of Shares authorized for issuance under the Share Pool:
(a) A Payout of an SAR, Tandem SAR, Restricted Stock Award, or
Other Stock-Based Award in the form of cash;
(b) A cancellation, termination, expiration, forfeiture, or
lapse for any reason (with the exception of the termination of a Tandem
SAR upon exercise of the related Stock Option, or the termination of a
related Stock Option upon exercise of the corresponding Tandem SAR) of
any Shares subject to an Incentive Award; and
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(c) Payment of an Option Price with previously acquired Shares
or by withholding Shares which otherwise would be acquired on exercise
(i.e., the Share Pool shall be increased by the number of Shares turned
in or withheld as payment of the Option Price).
1.7 COMMON STOCK AVAILABLE.
The Common Stock available for issuance or transfer under the Plan
shall be made available from Shares now or hereafter (i) held in the treasury of
the Company, (ii) authorized but unissued shares, or (iii) shares to be
purchased or acquired by the Company. No fractional shares shall be issued under
the Plan; payment for fractional shares shall be made in cash.
1.8 PARTICIPATION
(a) ELIGIBILITY. The Committee shall from time to time
designate those Employees, Consultants and/or Outside Directors, if
any, to be granted Incentive Awards under the Plan, the type of
Incentive Awards granted, the number of Shares, Stock Options, rights
or units, as the case may be, which shall be granted to each such
person, and any other terms or conditions relating to the Incentive
Awards as it may deem appropriate to the extent consistent with the
provisions of the Plan. A Grantee who has been granted an Incentive
Award may, if otherwise eligible, be granted additional Incentive
Awards at any time.
(b) INCENTIVE STOCK OPTION ELIGIBILITY. No Consultant or
Outside Director shall be eligible for the grant of any Incentive Stock
Option. In addition, no Employee shall be eligible for the grant of any
Incentive Stock Option who owns or would own immediately before the
grant of such Incentive Stock Option, directly or indirectly, stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or any Parent or
Subsidiary. This restriction does not apply if, at the time such
Incentive Stock Option is granted, the Incentive Stock Option exercise
price is at least one hundred and ten percent (110%) of the Fair Market
Value on the date of grant and the Incentive Stock Option by its terms
is not exercisable after the expiration of five (5) years from the date
of grant. For the purpose of the immediately preceding sentence, the
attribution rules of Section 424(d) of the Code shall apply for the
purpose of determining an Employee's percentage ownership in the
Company or any Parent or Subsidiary. This paragraph shall be construed
consistent with the requirements of Section 422 of the Code.
1.9 TYPES OF INCENTIVE AWARDS
The types of Incentive Awards under the Plan are Stock Options, Stock
Appreciation Rights and Supplemental Payments as described in SECTION 2,
Restricted Stock and Supplemental Payments as described in SECTION 3,
Performance Units, Performance Shares and Supplemental Payments as described in
SECTION 4, Other Stock-Based Awards and Supplemental Payments as described in
SECTION 5, or any combination of the foregoing.
SECTION 2.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 GRANT OF STOCK OPTIONS
The Committee is authorized to grant Stock Options to Employees,
Consultants and/or Outside Directors in accordance with the terms and conditions
of the Plan, and with such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine in its
discretion. Successive grants may be made to the same Grantee whether or not any
Stock Option previously granted to such person remains unexercised.
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2.2 STOCK OPTION TERMS
(a) WRITTEN AGREEMENT. Each grant of an Stock Option shall be
evidenced by a written Incentive Agreement. Among its other provisions,
each Incentive Agreement shall set forth the extent to which the
Grantee shall have the right to exercise the Stock Option following
termination of the Grantee's Employment. Such provisions shall be
determined in the discretion of the Committee, shall be included in the
Grantee's Incentive Agreement, need not be uniform among all Stock
Options issued pursuant to the Plan.
(b) NUMBER OF SHARES. Each Stock Option shall specify the
number of Shares of Common Stock to which it pertains.
(c) EXERCISE PRICE. The exercise price per Share of Common
Stock under each Stock Option shall be determined by the Committee;
provided, however, that in the case of an Incentive Stock Option, such
exercise price shall not be less than 100% of the Fair Market Value per
Share on the date the Incentive Stock Option is granted. To the extent
that the Stock Option is intended to qualify for the Performance-Based
Exception, the exercise price shall not be less than 100% of the Fair
Market Value per Share on the date the Stock Option is granted. Each
Stock Option shall specify the method of exercise which shall be
consistent with the requirements of SECTION 2.3(a).
(d) TERM. The Committee shall fix the term of each Stock
Option which shall be not more than ten (10) years from the date of
grant. In the event no term is fixed, such term shall be ten (10) years
from the date of grant.
(e) EXERCISE. The Committee shall determine the time or times
at which a Stock Option may be exercised in whole or in part. Each
Stock Option may specify the required period of continuous Employment
and/or the performance objectives to be achieved before the Stock
Option or portion thereof will become exercisable. Each Stock Option,
the exercise of which, or the timing of the exercise of which, is
dependent, in whole or in part, on the achievement of designated
performance objectives, may specify a minimum level of achievement in
respect of the specified performance objectives below which no Stock
Options will be exercisable and a method for determining the number of
Stock Options that will be exercisable if performance is at or above
such minimum but short of full achievement of the performance
objectives. All such terms and conditions shall be set forth in the
Incentive Agreement.
(f) INCENTIVE STOCK OPTIONS. Notwithstanding any contrary
provision in the Plan, to the extent that the aggregate Fair Market
Value (determined as of the time the Incentive Stock Option is granted)
of the Shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Grantee during any
single calendar year (under the Plan and any other stock option plans
of the Company and its Subsidiaries or Parent) exceeds the sum of
$100,000, such Incentive Stock Option shall be treated as a
Nonstatutory Stock Option, and not an Incentive Stock Option, but all
other terms and provisions of such Stock Option shall remain unchanged.
This paragraph shall be applied by taking Incentive Stock Options into
account in the order in which they are granted.
2.3 STOCK OPTION EXERCISES
(a) METHOD OF EXERCISE AND PAYMENT. Stock Options shall be
exercised by the delivery of a signed written notice of exercise to the
Company as of a date set by the Company in advance of the effective
date of the proposed exercise. The notice shall set forth the number of
Shares with respect to which the Option is to be exercised, accompanied
by full payment for the Shares.
The Option Price upon exercise of any Stock Option shall be
payable to the Company in full either: (i) in cash or its equivalent,
or (ii) subject to prior approval by the Committee, by tendering
previously acquired
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Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are
tendered by an Insider, if applicable, must have been held by the
Insider for at least six (6) months prior to their tender to satisfy
the Option Price), or (iii) subject to prior approval by the Committee,
by withholding Shares which otherwise would be acquired on exercise
having an aggregate Fair Market Value at the time of exercise equal to
the total Option Price, or (iv) subject to prior approval by the
Committee, by a combination of (i), (ii), and (iii) above. Any payment
in Shares of Common Stock shall be effected by the delivery of such
Shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any
other documents as the Secretary shall require from time to time.
The Committee also may allow (i) "cashless exercise" as
permitted under Federal Reserve Board's Regulation T, 12 CFR Part 220
(or its successor), and subject to applicable securities law
restrictions and tax withholdings, or (ii) by any other means which the
Committee, in its discretion, determines to be consistent with the
Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification
of exercise and full payment, the Company shall deliver to or on behalf
of the Grantee, in the name of the Grantee or other appropriate
recipient, Share certificates for the number of Shares purchased under
the Stock Option. Such delivery shall be effected for all purposes when
a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to Grantee or other
appropriate recipient.
During the lifetime of a Grantee, each Option granted to him
shall be exercisable only by the Grantee or a broker-dealer acting on
his behalf pursuant to a cashless exercise under the foregoing
provisions of this SECTION 2.3(a). No Option shall be assignable or
transferable by Grantee otherwise than by will or by the laws of
descent and distribution.
(b) RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may
impose such restrictions on any Shares acquired pursuant to the
exercise of a Stock Option as it may deem advisable, including, without
limitation, restrictions under (i) any buy/sell agreement or right of
first refusal, (ii) any applicable federal securities laws, (iii) the
requirements of any stock exchange or market upon which such Shares are
then listed and/or traded, or (iv) any blue sky or state securities law
applicable to such Shares.
(c) NOTIFICATION WITH RESPECT TO INCENTIVE STOCK OPTIONS.
Notwithstanding any other provision of the Plan, a Grantee who disposes
of Shares of Common Stock acquired upon the exercise of an Incentive
Stock Option by a sale or exchange either (i) within two (2) years
after the date of the grant of the Incentive Stock Option under which
the Shares were acquired or (ii) within one (1) year after the transfer
of such Shares to him pursuant to exercise, shall promptly notify the
Company of such disposition, the amount realized and his adjusted basis
in such Shares.
(d) PROCEEDS OF OPTION EXERCISE. The proceeds received by the
Company from the sale of Shares pursuant to Stock Options exercised
under the Plan shall be used for general corporate purposes.
2.4 STOCK APPRECIATION RIGHTS IN TANDEM WITH NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may, at the time of grant of a
Nonstatutory Stock Option, or at any time thereafter during the term of
the Nonstatutory Stock Option, grant Stock Appreciation Rights with
respect to all or any portion of the Shares of Common Stock covered by
such Nonstatutory Stock Option. A Stock Appreciation Right in tandem
with a Nonstatutory Stock Option is referred to herein as a "TANDEM
SAR."
(b) GENERAL PROVISIONS. The terms and conditions of each
Tandem SAR shall be evidenced by an Incentive Agreement. The Option
Price per Share of a Tandem SAR shall be fixed in the Incentive
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Agreement and shall not be less than one hundred percent (100%) of the
Fair Market Value of a Share on the grant date of the Nonstatutory
Stock Option to which it relates.
(c) EXERCISE. A Tandem SAR may be exercised at any time the
Nonstatutory Stock Option to which it relates is then exercisable, but
only to the extent such Nonstatutory Stock Option is exercisable, and
shall otherwise be subject to the conditions applicable to such
Nonstatutory Stock Option. When a Tandem SAR is exercised, the
Nonstatutory Stock Option to which it relates shall terminate to the
extent of the number of Shares with respect to which the Tandem SAR is
exercised. Similarly, when a Nonstatutory Stock Option is exercised,
the Tandem SARs relating to the Shares covered by such Nonstatutory
Stock Option exercise shall terminate. Any Tandem SAR which is
outstanding on the last day of the term of the related Nonstatutory
Stock Option shall be automatically exercised on such date for cash,
without the need for any action by the Grantee, to the extent of any
Appreciation.
(d) SETTLEMENT. Upon exercise of a Tandem SAR, the holder
shall receive, for each Share with respect to which the Tandem SAR is
exercised, an amount equal to the Appreciation. The Appreciation shall
be payable in cash, Common Stock, or a combination of both, as
specified in the Incentive Agreement (or in the discretion of the
Committee if not so specified). The Appreciation shall be paid within
30 calendar days of the exercise of the Tandem SAR. The number of
Shares of Common Stock which shall be issuable upon exercise of a
Tandem SAR shall be determined by dividing (1) by (2), where (1) is the
number of Shares as to which the Tandem SAR is exercised multiplied by
the Appreciation in such shares and (2) is the Fair Market Value of a
Share on the exercise date.
2.5 STOCK APPRECIATION RIGHTS INDEPENDENT OF NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may grant Stock Appreciation Rights
independent of Nonstatutory Stock Options ("INDEPENDENT SARS").
(b) GENERAL PROVISIONS. The terms and conditions of each
Independent SAR shall be evidenced by an Incentive Agreement. The
exercise price per share of Common Stock shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share of Common
Stock on the date of grant of the Independent SAR. The term of an
Independent SAR shall be determined by the Committee.
(c) EXERCISE. Independent SARs shall be exercisable at such
time and subject to such terms and conditions as the Committee shall
specify in the Incentive Agreement for the Independent SAR grant.
(d) SETTLEMENT. Upon exercise of an Independent SAR, the
holder shall receive, for each Share specified in the Independent SAR
grant, an amount equal to the Spread. The Spread shall be payable in
cash, Common Stock, or a combination of both, in the discretion of the
Committee or as specified in the Incentive Agreement. The Spread shall
be paid within 30 calendar days of the exercise of the Independent SAR.
The number of Shares of Common Stock which shall be issuable upon
exercise of an Independent SAR shall be determined by dividing (1) by
(2), where (1) is the number of Shares as to which the Independent SAR
is exercised multiplied by the Spread in such Shares and (2) is the
Fair Market Value of a Share on the exercise date.
2.6 RELOAD OPTIONS
At the discretion of the Committee, the Grantee may be granted under an
Incentive Agreement, replacement Stock Options that permit the Grantee to
purchase an additional number of Shares equal to the number of previously owned
Shares surrendered by the Grantee to pay all or a portion of the Option Price
upon exercise of his Stock Options.
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2.7 SUPPLEMENTAL PAYMENT ON EXERCISE OF NONSTATUTORY STOCK OPTIONS OR STOCK
APPRECIATION RIGHTS
The Committee, either at the time of grant or as of the time of
exercise of any Nonstatutory Stock Option or Stock Appreciation Right, may
provide in the Incentive Agreement for a Supplemental Payment by the Company to
the Grantee with respect to the exercise of any Nonstatutory Stock Option or
Stock Appreciation Right. The Supplemental Payment shall be in the amount
specified by the Committee, which amount shall not exceed the amount necessary
to pay the federal and state income tax payable with respect to both the
exercise of the Nonstatutory Stock Option and/or Stock Appreciation Right and
the receipt of the Supplemental Payment, assuming the holder is taxed at either
the maximum effective income tax rate applicable thereto or at a lower tax rate
as deemed appropriate by the Committee. The Committee shall have the discretion
to grant Supplemental Payments that are payable solely in cash or Supplemental
Payments that are payable in cash, Common Stock, or a combination of both, as
determined by the Committee at the time of payment.
SECTION 3.
RESTRICTED STOCK
3.1 AWARD OF RESTRICTED STOCK
(a) GRANT. In consideration of the performance of Employment
by any Grantee who is an Employee, Consultant or Outside Director,
Shares of Restricted Stock may be awarded under the Plan by the
Committee with such restrictions during the Restriction Period as the
Committee may designate in its discretion, any of which restrictions
may differ with respect to each particular Grantee. Restricted Stock
shall be awarded for no additional consideration or such additional
consideration as the Committee may determine, which consideration may
be less than, equal to or more than the Fair Market Value of the shares
of Restricted Stock on the grant date. The terms and conditions of each
grant of Restricted Stock shall be evidenced by an Incentive Agreement.
(b) IMMEDIATE TRANSFER WITHOUT IMMEDIATE DELIVERY OF
RESTRICTED STOCK. Unless otherwise specified in the Grantee's Incentive
Agreement, each Restricted Stock Award shall constitute an immediate
transfer of the record and beneficial ownership of the Shares of
Restricted Stock to the Grantee in consideration of the performance of
services as an Employee, Consultant or Outside Director, as applicable,
entitling such Grantee to all voting and other ownership rights in such
Shares.
As specified in the Incentive Agreement, a Restricted Stock
Award may limit the Grantee's dividend rights during the Restriction
Period in which the shares of Restricted Stock are subject to a
"substantial risk of forfeiture" (within the meaning given to such term
under Code Section 83) and restrictions on transfer. In the Incentive
Agreement, the Committee may apply any restrictions to the dividends
that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Shares of
Restricted Stock granted to a Covered Employee is designed to comply
with the requirements of the Performance-Based Exception, the Committee
may apply any restrictions it deems appropriate to the payment of
dividends declared with respect to such Shares of Restricted Stock,
such that the dividends and/or the Shares of Restricted Stock maintain
eligibility for the Performance-Based Exception. In the event that any
dividend constitutes a derivative security or an equity security
pursuant to the rules under Section 16 of the Exchange Act, such
dividend shall be subject to a vesting period equal to the remaining
vesting period of the Shares of Restricted Stock with respect to which
the dividend is paid.
Shares awarded pursuant to a grant of Restricted Stock may be
issued in the name of the Grantee and held, together with a stock power
endorsed in blank, by the Committee or Company (or their delegates) or
in trust or in escrow pursuant to an agreement satisfactory to the
Committee, as determined by the Committee,
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until such time as the restrictions on transfer have expired. All such
terms and conditions shall be set forth in the particular Grantee's
Incentive Agreement. The Company or Committee (or their delegates)
shall issue to the Grantee a receipt evidencing the certificates held
by it which are registered in the name of the Grantee.
3.2 RESTRICTIONS
(a) FORFEITURE OF RESTRICTED STOCK. Restricted Stock awarded
to a Grantee may be subject to the following restrictions until the
expiration of the Restriction Period: (i) a restriction that
constitutes a "substantial risk of forfeiture" (as defined in Code
Section 83), or a restriction on transferability; (ii) unless otherwise
specified by the Committee in the Incentive Agreement, the Restricted
Stock that is subject to restrictions which are not satisfied shall be
forfeited and all rights of the Grantee to such Shares shall terminate;
and (iii) any other restrictions that the Committee determines in
advance are appropriate, including, without limitation, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Stock to a continuing substantial risk of forfeiture in the
hands of any transferee. Any such restrictions shall be set forth in
the particular Grantee's Incentive Agreement.
(b) ISSUANCE OF CERTIFICATES. Reasonably promptly after the
date of grant with respect to Shares of Restricted Stock, the Company
shall cause to be issued a stock certificate, registered in the name of
the Grantee to whom such Shares of Restricted Stock were granted,
evidencing such Shares; provided, however, that the Company shall not
cause to be issued such a stock certificate unless it has received a
stock power duly endorsed in blank with respect to such Shares. Each
such stock certificate shall bear the following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS,
TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS
AGAINST TRANSFER) CONTAINED IN THE BRAZOS SPORTSWEAR, INC.
1997 INCENTIVE PLAN AND AN INCENTIVE AGREEMENT ENTERED INTO
BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND BRAZOS
SPORTSWEAR, INC. A COPY OF THE PLAN AND INCENTIVE AGREEMENT
ARE ON FILE IN THE OFFICE OF THE SECRETARY OF BRAZOS
SPORTSWEAR, INC.
Such legend shall not be removed from the certificate evidencing such
Shares of Restricted Stock until such Shares vest pursuant to the terms
of the Incentive Agreement.
(c) REMOVAL OF RESTRICTIONS. The Committee, in its discretion,
shall have the authority to remove any or all of the restrictions on
the Restricted Stock if it determines that, by reason of a change in
applicable law or another change in circumstance arising after the
grant date of the Restricted Stock, such action is appropriate.
3.3 DELIVERY OF SHARES OF COMMON STOCK
Subject to withholding taxes under SECTION 7.3 and to the terms of the
Incentive Agreement, a stock certificate evidencing the Shares of Restricted
Stock with respect to which the restrictions in the Incentive Agreement have
been satisfied shall be delivered to the Grantee or other appropriate recipient
free of restrictions. Such delivery shall be effected for all purposes when the
Company shall have deposited such certificate in the United States mail,
addressed to the Grantee or other appropriate recipient.
3.4 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or vesting of Restricted
Stock, may provide for a Supplemental Payment by the Company to the holder in an
amount specified by the Committee, which amount shall not exceed the amount
necessary to pay the federal and state income tax payable with respect to both
the vesting of the Restricted Stock
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and receipt of the Supplemental Payment, assuming the Grantee is taxed at either
the maximum effective income tax rate applicable thereto or at a lower tax rate
as deemed appropriate by the Committee. The Committee shall have the discretion
to grant Supplemental Payments that are payable solely in cash or Supplemental
Payments that are payable in cash, Common Stock, or a combination of both, as
determined by the Committee at the time of payment.
SECTION 4.
PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1 PERFORMANCE BASED AWARDS
(a) GRANT. The Committee is authorized to grant Performance
Units and Performance Shares to selected Grantees who are Employees or
Consultants. Each grant of Performance Units and/or Performance Shares
shall be evidenced by an Incentive Agreement in such amounts and upon
such terms as shall be determined by the Committee. The Committee may
make grants of Performance Units or Performance Shares in such a manner
that more than one Performance Period is in progress concurrently. For
each Performance Period, the Committee shall establish the number of
Performance Units or Performance Shares and their contingent values
which may vary depending on the degree to which performance criteria
established by the Committee are met.
(b) PERFORMANCE CRITERIA. At the beginning of each Performance
Period, the Committee shall (i) establish for such Performance Period
specific financial or non-financial performance objectives that the
Committee believes are relevant to the Company's business objectives;
(ii) determine the value of a Performance Unit or the number of Shares
under a Performance Share grant relative to performance objectives; and
(iii) notify each Grantee in writing of the established performance
objectives and, if applicable, the minimum, target, and maximum value
of Performance Units or Performance Shares for such Performance Period.
(c) MODIFICATION. If the Committee determines, in its
discretion exercised in good faith, that the established performance
measures or objectives are no longer suitable to the Company's
objectives because of a change in the Company's business, operations,
corporate structure, capital structure, or other conditions the
Committee deems to be appropriate, the Committee may modify the
performance measures and objectives to the extent it considers to be
necessary. The Committee shall determine whether any such modification
would cause the Performance Unit or Performance Share to fail to
qualify for the Performance-Based Exception.
(d) PAYMENT. The basis for payment of Performance Units or
Performance Shares for a given Performance Period shall be the
achievement of those performance objectives determined by the Committee
at the beginning of the Performance Period as specified in the
Grantee's Incentive Agreement. If minimum performance is not achieved
for a Performance Period, no payment shall be made and all contingent
rights shall cease. If minimum performance is achieved or exceeded, the
value of a Performance Unit or Performance Share may be based on the
degree to which actual performance exceeded the preestablished minimum
performance standards. The amount of payment shall be determined by
multiplying the number of Performance Units or Performance Shares
granted at the beginning of the Performance Period times the final
Performance Unit or Performance Share value. Payments shall be made, in
the discretion of the Committee as specified in the Incentive
Agreement, solely in cash or Common Stock, or a combination of cash and
Common Stock, following the close of the applicable Performance Period.
(e) SPECIAL RULE FOR COVERED EMPLOYEES. The Committee may
establish performance goals applicable to Performance Units or
Performance Shares awarded to Covered Employees in such a manner as
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shall permit payments with respect thereto to qualify for the
Performance-Based Exception. If a Performance Unit or Performance Share
granted to a Covered Employee is intended to comply with the
Performance-Based Exception, the Committee in establishing performance
goals shall be guided by Treasury Regulation ss. 1.162- 27(e)(2) (or
its successor).
4.2 SUPPLEMENTAL PAYMENT ON VESTING OF PERFORMANCE UNITS OR PERFORMANCE
SHARES
The Committee, either at the time of grant or at the time of vesting of
Performance Units or Performance Shares, may provide for a Supplemental Payment
by the Company to the Grantee in an amount specified by the Committee, which
amount shall not exceed the amount necessary to pay the federal and state income
tax payable with respect to both the vesting of such Performance Units or
Performance Shares and receipt of the Supplemental Payment, assuming the Grantee
is taxed at either the maximum effective income tax rate applicable thereto or
at a lower tax rate as seemed appropriate by the Committee. The Committee shall
have the discretion to grant Supplemental Payments that are payable in cash,
Common Stock, or a combination of both, as determined by the Committee at the
time of payment.
SECTION 5.
OTHER STOCK-BASED AWARDS
5.1 GRANT OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards may be awarded by the Committee to selected
Grantees that are denominated or payable in, valued in whole or in part by
reference to, or otherwise related to, Shares of Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan and the goals of the
Company. Other types of Stock-Based Awards include, without limitation, Deferred
Stock, purchase rights, Shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, other
rights convertible into Shares, Incentive Awards valued by reference to the
value of securities of or the performance of a specified Subsidiary, division or
department, and settlement in cancellation of rights of any person with a vested
interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or
Subsidiary. As is the case with other Incentive Awards, Other Stock-Based Awards
may be awarded either alone or in addition to or in tandem with any other
Incentive Awards.
5.2 OTHER STOCK-BASED AWARD TERMS
(a) WRITTEN AGREEMENT. The terms and conditions of each grant
of an Other Stock-Based Award shall be evidenced by an Incentive
Agreement.
(b) PURCHASE PRICE. Except to the extent that an Other
Stock-Based Award is granted in substitution for an outstanding
Incentive Award or is delivered upon exercise of a Stock Option, the
amount of consideration required to be received by the Company shall be
either (i) no consideration other than services actually rendered (in
the case of authorized and unissued shares) or to be rendered, or (ii)
in the case of an Other Stock-Based Award in the nature of a purchase
right, consideration (other than services rendered or to be rendered)
at least equal to 50% of the Fair Market Value of the Shares covered by
such grant on the date of grant.
(c) PERFORMANCE CRITERIA AND OTHER TERMS. In its discretion,
the Committee may specify such criteria, periods or goals for vesting
in Other Stock-Based Awards and payment thereof to the Grantee as it
shall determine; and the extent to which such criteria, periods or
goals have been met shall be determined by the Committee. All terms and
conditions of Other Stock-Based Awards shall be determined by the
Committee
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and set forth in the Incentive Agreement. The Committee may also
provide for a Supplemental Payment similar to such payment as described
in SECTION 4.2.
(d) PAYMENT. Other Stock-Based Awards may be paid in Shares of
Common Stock or other consideration related to such Shares, in a single
payment or in installments on such dates as determined by the
Committee, all as specified in the Incentive Agreement.
(e) DIVIDENDS. The Grantee of an Other Stock-Based Award shall
be entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of Shares covered by
the Other Stock-Based Award, as determined by the Committee and set
forth in the Incentive Agreement. The Committee may also provide in the
Incentive Agreement that such amounts (if any) shall be deemed to have
been reinvested in additional Common Stock.
SECTION 6.
PROVISIONS RELATING TO PLAN PARTICIPATION
6.1 PLAN CONDITIONS
(a) INCENTIVE AGREEMENT. Each Grantee to whom an Incentive
Award is granted shall be required to enter into an Incentive Agreement
with the Company, in such a form as is provided by the Committee. The
Incentive Agreement shall contain specific terms as determined by the
Committee, in its discretion, with respect to the Grantee's particular
Incentive Award. Such terms need not be uniform among all Grantees or
any similarly-situated Grantees. The Incentive Agreement may include,
without limitation, vesting, forfeiture and other provisions particular
to the particular Grantee's Incentive Award, as well as, for example,
provisions to the effect that the Grantee (i) shall not disclose any
confidential information acquired during Employment with the Company,
(ii) shall abide by all the terms and conditions of the Plan and such
other terms and conditions as may be imposed by the Committee, (iii)
shall not interfere with the employment or other service of any
employee, (iv) shall not compete with the Company or become involved in
a conflict of interest with the interests of the Company, (v) shall
forfeit an Incentive Award if terminated for Cause, (vi) shall not be
permitted to make an election under Section 83(b) of the Code when
applicable, and (vii) shall be subject to any other agreement between
the Grantee and the Company regarding Shares that may be acquired under
an Incentive Award including, without limitation, an agreement
restricting the transferability of Shares by Grantee. An Incentive
Agreement shall include such terms and conditions as are determined by
the Committee, in its discretion, to be appropriate with respect to any
individual Grantee. The Incentive Agreement shall be signed by the
Grantee to whom the Incentive Award is made and by an Authorized
Officer.
(b) NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any
instrument executed pursuant to the Plan shall create any Employment
rights (including without limitation, rights to continued Employment)
in any Grantee or affect the right of the Company to terminate the
Employment of any Grantee at any time without regard to the existence
of the Plan.
(c) SECURITIES REQUIREMENTS. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act of
1933 of any Shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to cause to
be issued or delivered any certificates evidencing Shares pursuant to
the Plan unless and until the Company is advised by its counsel that
the issuance and delivery of such certificates is in compliance with
all applicable laws, regulations of governmental authorities, and the
requirements of any securities exchange on which Shares are traded. The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing Shares of Common Stock pursuant to the terms
hereof, that the recipient
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of such Shares make such covenants, agreements and representations, and
that such certificates bear such legends, as the Committee, in its
discretion, deems necessary or desirable.
6.2 TRANSFERABILITY
(a) NON-TRANSFERABLE AWARDS AND OPTIONS. No Incentive Award
and no right under the Plan, contingent or otherwise, will be (i)
assignable, saleable, or otherwise transferable by a Grantee except by
will or by the laws of descent and distribution, or (ii) subject to any
encumbrance, pledge, lien, assignment or charge of any nature.
No transfer by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Committee has been
furnished with a copy of the deceased Grantee's enforceable will or
such other evidence as the Committee deems necessary to establish the
validity of the transfer. Any attempted transfer in violation of this
SECTION 6.2(a) shall be void and ineffective.
(b) ABILITY TO EXERCISE RIGHTS. Subject to a beneficiary
designation pursuant to SECTION 7.5, only the Grantee (or his legal
guardian in the event of Grantee's Disability), or in the event of his
death, his estate, may exercise Stock Options, receive cash payments
and deliveries of Shares, and otherwise assume the rights of the
Grantee.
6.3 RIGHTS AS A STOCKHOLDER
(a) NO STOCKHOLDER RIGHTS. Except as otherwise provided in
SECTION 3.1(B) for grants of Restricted Stock, a Grantee of an
Incentive Award (or a permitted transferee of such Grantee) shall have
no rights as a stockholder with respect to any Shares of Common Stock
until the issuance of a stock certificate for such Shares.
(b) REPRESENTATION OF OWNERSHIP. In the case of the exercise
of an Incentive Award by a person or estate acquiring the right to
exercise such Incentive Award by reason of the death or Disability of a
Grantee, the Committee may require reasonable evidence as to the
ownership of such Incentive Award or the authority of such person and
may require such consents and releases of taxing authorities as the
Committee may deem advisable.
6.4 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
The exercise of any Incentive Award granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which Shares of Common Stock are
traded. The Committee may, in its discretion, defer the effectiveness of any
exercise of an Incentive Award in order to allow the issuance of Shares of
Common Stock to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or state
securities laws. The Committee shall inform the Grantee in writing of its
decision to defer the effectiveness of the exercise of an Incentive Award.
During the period that the effectiveness of the exercise of an Incentive Award
has been deferred, the Grantee may, by written notice to the Committee, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
6.5 CHANGE IN STOCK AND ADJUSTMENTS
(a) CHANGES IN LAW OR CIRCUMSTANCES. Subject to SECTION 6.7
which only applies in the event of a Change in Control, in the event of
any change in applicable laws or any change in circumstances which
results in or would result in any dilution of the rights granted under
the Plan, or which otherwise warrants
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equitable adjustment because it interferes with the intended operation
of the Plan, then, if the Committee should determine, in its
discretion, that such change equitably requires an adjustment in the
number or kind of shares of stock or other securities or property
theretofore subject, or which may become subject, to issuance or
transfer under the Plan or in the terms and conditions of outstanding
Incentive Awards, such adjustment shall be made in accordance with such
determination. Such adjustments may include changes with respect to (i)
the aggregate number of Shares that may be issued under the Plan, (ii)
the number of Shares subject to Incentive Awards, and (iii) the price
per Share for outstanding Incentive Awards. Any adjustment of an
Incentive Stock Option under this paragraph shall be made only to the
extent not constituting a "modification" within the meaning of Section
424(h)(3) of the Code unless otherwise agreed to by the Grantee in
writing. The Committee shall give notice to each applicable Grantee of
such adjustment which shall be effective and binding.
(b) EXERCISE OF CORPORATE POWERS. The existence of the Plan or
outstanding Incentive Awards hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any
merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting
the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
(c) RECAPITALIZATION OF THE COMPANY. Subject to SECTION 6.7,
if while there are Incentive Awards outstanding, the Company shall
effect any subdivision or consolidation of Shares of Common Stock or
other capital readjustment, the payment of a stock dividend, stock
split, combination of Shares, recapitalization or other increase or
reduction in the number of Shares outstanding, without receiving
compensation therefor in money, services or property, then the number
of Shares available under the Plan and the number of Incentive Awards
which may thereafter be exercised shall (i) in the event of an increase
in the number of Shares outstanding, be proportionately increased and
the Fair Market Value of the Incentive Awards awarded shall be
proportionately reduced; and (ii) in the event of a reduction in the
number of Shares outstanding, be proportionately reduced, and the Fair
Market Value of the Incentive Awards awarded shall be proportionately
increased. The Committee shall take such action and whatever other
action it deems appropriate so that the aggregate Option Price payable
to the Company and the value of each outstanding Option to the Grantee
shall not be changed.
(d) REORGANIZATION OF THE COMPANY. Subject to SECTION 6.7, if
the Company is reorganized, merged or consolidated, or is a party to a
plan of exchange with another corporation, pursuant to which
reorganization, merger, consolidation or exchange, stockholders of the
Company receive any Shares of Common Stock or other securities or
property, or if the Company should distribute securities of another
corporation to its stockholders, each Grantee shall be entitled to
receive, in lieu of the number of unexercised Incentive Awards
previously awarded, the number of Stock Options, Stock Appreciation
Rights, Performance Shares, Restricted Stock shares, or Other
Stock-Based Awards, with a corresponding adjustment to the Fair Market
Value of said Incentive Awards, to which such holder would have been
entitled pursuant to the terms of the corporate agreement, if
immediately prior to such corporate action, such Grantee had been the
holder of record of a number of Shares equal to the number of the
unexercised Incentive Awards previously awarded to him. For this
purpose, Restricted Stock shall be treated the same as unrestricted
outstanding Shares of Common Stock. In this regard, the Committee shall
take whatever other action it deems appropriate to preserve the rights
of Grantees holding outstanding Incentive Awards.
(e) ISSUE OF COMMON STOCK BY THE COMPANY. Except as
hereinabove expressly provided in this SECTION 6.5 and subject to
SECTION 6.7, the issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash
or property, or for labor or services, either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon any
conversion of shares or
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obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of, or Fair Market Value of, any
Incentive Awards then outstanding under previous Incentive Awards;
provided, however, in such event, Grantees of Restricted Stock shall be
treated the same as the holders of outstanding unrestricted Shares of
Common Stock.
6.6 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT
(a) TERMINATION OF EMPLOYMENT. Unless otherwise expressly
provided in the Grantee's Incentive Agreement, if the Grantee's
Employment is terminated for any reason other than due to his death,
Disability, Retirement or for Cause, any non-vested portion of any
Stock Option or other applicable Incentive Award at the time of such
termination shall automatically expire and terminate and no further
vesting shall occur. In such event, except as otherwise expressly
provided in his Incentive Agreement, the Grantee shall be entitled to
exercise his rights only with respect to the portion of the Incentive
Award that was vested as of the termination date for a period that
shall end on the earlier of (i) the expiration date set forth in the
Incentive Agreement with respect to the vested portion of such
Incentive Award or (ii) the date that occurs sixty (60) calendar days
after his termination date.
(b) TERMINATION OF EMPLOYMENT FOR CAUSE. Unless otherwise
expressly provided in the Grantee's Incentive Agreement, in the event
of the termination of a Grantee's Employment for Cause, all vested and
non-vested Stock Options and other Incentive Awards granted to such
Grantee shall expire, and shall not be exercisable, as of the
commencement of business on the date of such termination.
(c) RETIREMENT. Unless otherwise expressly provided in the
Grantee's Incentive Agreement, upon the Retirement of any Employee who
is a Grantee:
(i) any non-vested portion of any outstanding Option
or other Incentive Award shall immediately terminate and no
further vesting shall occur; and
(ii) any vested Option or other Incentive Award shall
expire on the earlier of (A) the expiration date set forth in
the Incentive Agreement for such Incentive Award; or (B) the
expiration of (1) six months after the date of Retirement in
the case of any Incentive Award other than an Incentive Stock
Option, or (2) three months after the date of Retirement in
the case of an Incentive Stock Option.
(d) DISABILITY OR DEATH. Unless otherwise expressly provided
in the Grantee's Incentive Agreement, upon termination of Employment as
a result of the Grantee's Disability or death:
(i) any nonvested portion of any outstanding Option
or other applicable Incentive Award shall immediately
terminate upon termination of Employment, as applicable, and
no further vesting shall occur; and
(ii) any vested Incentive Award shall expire upon the
earlier of either (A) the expiration date set forth in the
Incentive Agreement or (B) the first anniversary of the
Grantee's termination of Employment, as applicable, as a
result of his Disability or death.
In the case of any vested Incentive Stock Option held by an
Employee following termination of Employment, notwithstanding the
definition of "Disability" in SECTION 1.2, whether the Employee has
incurred a "Disability" for purposes of determining the length of the
Option exercise period following termination of Employment under this
paragraph (d) shall be determined by reference to Section 22(e)(3) of
the Code to the extent required by Section 422(c)(6) of the Code. The
Committee shall determine whether a Disability for purposes of this
paragraph (d) has occurred.
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(e) CONTINUATION. Subject to the conditions and limitations of
the Plan and applicable law and regulation in the event that a Grantee
ceases to be an Employee, Outside Director or Consultant, as
applicable, for whatever reason, the Committee and Grantee may mutually
agree with respect to any outstanding Option or other Incentive Award
then held by the Grantee (i) for an acceleration or other adjustment in
any vesting schedule applicable to the Incentive Award, (ii) for a
continuation of the exercise period following termination for a longer
period than is otherwise provided under such Incentive Award, or (iii)
to any other change in the terms and conditions of the Incentive Award.
In the event of any such change to an outstanding Inventive Award, a
written amendment to the Grantee's Incentive Agreement shall be
required.
6.7 CHANGE IN CONTROL
Notwithstanding any contrary provision in the Plan, in the event of a
Change in Control (as defined below), the following actions shall automatically
occur as of the Change in Control date unless expressly provided otherwise in
the Grantee's Incentive Agreement:
(a) all of the Stock Options and Stock Appreciation Rights
then outstanding shall become 100% vested and immediately and fully
exercisable;
(b) all of the restrictions and conditions of any Restricted
Stock and any Other Stock-Based Awards then outstanding shall be deemed
satisfied, and the Restriction Period with respect thereto shall be
deemed to have expired, as of the date of the Change in Control; and
(c) all of the Performance Shares, Performance Units and any
Other Stock-Based Awards shall become fully vested, deemed earned in
full, and promptly paid within thirty (30) days to the affected
Grantees without regard to payment schedules and notwithstanding that
the applicable performance cycle, retention cycle or other restrictions
and conditions have not been completed or satisfied.
Notwithstanding any other provision of this Plan, unless expressly
provided otherwise in the Grantee's Incentive Agreement, the provisions of this
SECTION 6.7 may not be terminated, amended, or modified to adversely affect any
Incentive Award theretofore granted under the Plan without the prior written
consent of the Grantee with respect to his outstanding Incentive Awards.
For all purposes of this Plan, a "CHANGE IN CONTROL" of the Company
shall mean:
(a) The acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"PERSON") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty percent (20%) or more of
the total voting power of all the Company's then outstanding securities
entitled to vote generally in the election of directors to the Board;
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i)
any acquisition by the Company or its Parent or Subsidiaries, (ii) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or its Parent or Subsidiaries, or (iii)
any acquisition consummated with the prior approval of the Board.
(b) During the period of two consecutive calendar years,
individuals who at the beginning of such period constitute the Board,
and any new director(s) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds of the directors then still in office, who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(c) The Company becomes a party to a merger, plan of
reorganization, consolidation or share exchange in which either (i) the
Company will not be the surviving corporation or (ii) the Company will
be
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the surviving corporation and any outstanding shares of the Company's
common stock will be converted into shares of any other company (other
than a reincorporation or the establishment of a holding company
involving no change of ownership of the Company) or other securities,
cash or other property (excluding payments made solely for fractional
shares); or
(d) The shareholders of the Company approve a merger, plan of
reorganization, consolidation or share exchange with any other
corporation, and immediately following such merger, plan of
reorganization, consolidation or share exchange the holders of the
voting securities of the Company outstanding immediately prior thereto
hold securities representing fifty percent (50%) or less of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger, plan of
reorganization, consolidation or share exchange; PROVIDED, HOWEVER,
that notwithstanding the foregoing, no Change in Control shall be
deemed to have occurred if one-half (1/2) or more of the members of the
Board of the Company or such surviving entity immediately after such
merger, plan of reorganization, consolidation or share exchange is
comprised of persons who served as directors of the Company immediately
prior to such merger, plan of reorganization, consolidation or share
exchange or who are otherwise designees of the Company; or
(e) Upon approval by the Company's stockholders of a complete
liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company
other than to a Parent or Subsidiary; or
(f) Any other event that a majority of the Board, in its sole
discretion, shall determine constitutes a Change in Control.
Notwithstanding the occurrence of any of the foregoing events of this
SECTION 6.7 which result in a Change in Control, the Board may determine in its
discretion, if it deems it to be in the best interest of the Company, that an
event or events otherwise constituting a Change in Control shall not be
considered a Change in Control. Such determination shall be effective only if it
is made by the Board prior to the occurrence of an event that otherwise would be
or probably would lead to a Change in Control; or after such event if made by
the Board a majority of which is composed of directors who were members of the
Board immediately prior to the event that otherwise would be or probably would
lead to a Change in Control.
6.8 EXCHANGE OF INCENTIVE AWARDS
The Committee may, in its discretion, permit any Grantee to surrender
outstanding Incentive Awards in order to exercise or realize his rights under
other Incentive Awards or in exchange for the grant of new Incentive Awards, or
require holders of Incentive Awards to surrender outstanding Incentive Awards
(or comparable rights under other plans or arrangements) as a condition
precedent to the grant of new Incentive Awards.
6.9 FINANCING
The Company may extend and maintain, or arrange for and guarantee, the
extension and maintenance of financing to any Grantee to purchase Shares
pursuant to exercise of an Incentive Award upon such terms as are approved by
the Committee in its discretion.
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SECTION 7.
GENERAL
7.1 EFFECTIVE DATE AND GRANT PERIOD
This Plan is adopted by the Board effective as of July 2, 1997 (the
"EFFECTIVE DATE"), subject to the approval of the stockholders of the Company by
July 1, 1998. If the requisite stockholder approval is not obtained, then the
Plan and any Incentive Awards granted hereunder shall become null and void and
of no force or effect. Unless sooner terminated by the Board, no Incentive Award
shall be granted under the Plan after ten (10) years from the Effective Date.
7.2 FUNDING AND LIABILITY OF COMPANY
No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made, or otherwise
to segregate any assets. In addition, the Company shall not be required to
maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for
purposes of the Plan. Although bookkeeping accounts may be established with
respect to Grantees who are entitled to cash, Common Stock or rights thereto
under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Company shall not be required to segregate any assets that may
at any time be represented by cash, Common Stock or rights thereto. The Plan
shall not be construed as providing for such segregation, nor shall the Company,
the Board or the Committee be deemed to be a trustee of any cash, Common Stock
or rights thereto. Any liability or obligation of the Company to any Grantee
with respect to an Incentive Award shall be based solely upon any contractual
obligations that may be created by this Plan and any Incentive Agreement, and no
such liability or obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company,
the Board nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
7.3 WITHHOLDING TAXES
(a) TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Grantee to remit to the
Company, an amount sufficient to satisfy federal, state, and local
taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of the
Plan or an Incentive Award hereunder.
(b) SHARE WITHHOLDING. With respect to tax withholding
required upon the exercise of Stock Options or SARs, upon the lapse of
restrictions on Restricted Stock, or upon any other taxable event
arising as a result of any Incentive Awards, Grantees may elect,
subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares
having a Fair Market Value on the date the tax is to be determined
equal to the minimum statutory total tax which could be imposed on the
transaction. All such elections shall be made in writing, signed by the
Grantee, and shall be subject to any restrictions or limitations that
the Committee, in its discretion, deems appropriate.
(c) INCENTIVE STOCK OPTIONS. With respect to Shares received
by a Grantee pursuant to the exercise of an Incentive Stock Option, if
such Grantee disposes of any such Shares within (i) two years from the
date of grant of such Option or (ii) one year after the transfer of
such shares to the Grantee, the Company shall have the right to
withhold from any salary, wages or other compensation payable by the
Company to the Grantee an amount sufficient to satisfy federal, state
and local tax withholding requirements attributable to such
disqualifying disposition.
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(d) LOANS. The Committee may provide for loans, on either a
short term or demand basis, from the Company to a Grantee who is an
Employee or Consultant to permit the payment of taxes required by law.
7.4 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
7.5 DESIGNATION OF BENEFICIARY BY PARTICIPANT
Each Grantee may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each such designation shall revoke all prior
designations by the same Grantee, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Grantee in writing with
the Committee during the Grantee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
7.6 DEFERRALS
The Committee may permit a Grantee to defer such Grantee's receipt of
the payment of cash or the delivery of Shares that would, otherwise be due to
such Grantee by virtue of the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals with respect
to Performance Units, Performance Shares or Other Stock-Based Awards. If any
such deferral election is permitted, the Committee shall, in its discretion,
establish rules and procedures for such payment deferrals to the extent
consistent with the Code.
7.7 AMENDMENT AND TERMINATION
The Board shall have complete power and authority to terminate or amend
the Plan at any time; provided, however, that the Board shall not, without the
approval of the stockholders of the Company within the time period required by
applicable law, (a) except as provided in SECTION 6.5, increase the maximum
number of Shares which may be issued under the Plan pursuant to SECTION 1.4, (b)
amend the requirements as to the class of Employees eligible to purchase Common
Stock under the Plan, (c) increase the maximum limits on Incentive Awards to
Covered Employees as set for compliance with the Performance-Based Exception,
(d) extend the term of the Plan, or (e) decrease the authority granted to the
Committee under the Plan in contravention of Rule 16b-3 under the Exchange Act.
No termination, amendment, or modification of the Plan shall adversely
affect in any material way any outstanding Incentive Award previously granted to
a Grantee under the Plan, without the written consent of such Grantee or other
designated holder of such Incentive Award.
In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Company's Common Stock is then listed or quoted,
or (b) the Code (or regulations promulgated thereunder), require stockholder
approval in order to maintain compliance with such listing requirements or to
maintain any favorable tax advantages or qualifications, then the Plan shall not
be amended in such respect without approval of the Company's stockholders.
7.8 REQUIREMENTS OF LAW
The granting of Incentive Awards and the issuance of Shares under the
Plan shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required. Certificates evidencing shares of Common Stock delivered under
this Plan (to the extent that such shares are so evidenced) may be subject to
such stop transfer orders and other restrictions as the Committee may deem
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advisable under the rules and regulations of the Securities and Exchange
Commission, any securities exchange or transaction reporting system upon which
the Common Stock is then listed or to which it is admitted for quotation, and
any applicable federal or state securities law. The Committee may cause a legend
or legends to be placed upon such certificates (if any) to make appropriate
reference to such restrictions.
7.9 RULE 16B-3 SECURITIES LAW COMPLIANCE
With respect to Insiders, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the Exchange Act. Any
ambiguities or inconsistencies in the construction of an Incentive Award or the
Plan shall be interpreted to give effect to such intention. However, to the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void to the extent permitted by law and deemed
advisable by the Committee in its discretion.
7.10 COMPLIANCE WITH CODE SECTION 162(M)
Unless otherwise determined by the Committee with respect to any
particular Incentive Award, it is extended that the Plan comply fully with and
meet all the requirements of Section 162(m) of the Code so that any applicable
types of Incentive Awards that are granted to Covered Employees shall qualify
for the Performance-Based Exception. If any provision of the Plan or an
Incentive Agreement would disqualify the Plan or would not otherwise permit the
Plan or Incentive Award to comply with the Performance-Based Exception as so
intended, such provision shall be construed or deemed amended to conform to the
requirements of the Performance-Based Exception to the extent permitted by
applicable law and deemed advisable by the Committee; provided that no such
construction or amendment shall have an adverse effect on the prior grant of an
Incentive Award or the economic value to a Grantee of any outstanding Incentive
Award.
7.11 SUCCESSORS
All obligations of the Company under the Plan with respect to Incentive
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
7.12 MISCELLANEOUS PROVISIONS
(a) No Employee, Consultant, Outside Director, or other person
shall have any claim or right to be granted an Incentive Award under
the Plan. Neither the Plan, nor any action taken hereunder, shall be
construed as giving any Employee, Consultant, or Outside Director any
right to be retained in the Employment or other service of the Company
or any Parent or Subsidiary.
(b) No Shares of Common Stock shall be issued hereunder unless
counsel for the Company is then reasonably satisfied that such issuance
will be in compliance with federal and state securities laws, if
applicable.
(c) The expenses of the Plan shall be borne by the Company.
(d) By accepting any Incentive Award, each Grantee and each
person claiming by or through him shall be deemed to have indicated his
acceptance of the Plan.
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7.13 SEVERABILITY
In the event that any provision of this Plan shall be held illegal,
invalid or unenforceable for any reason, such provision shall be fully
severable, but shall not affect the remaining provisions of the Plan, and the
Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision was not included herein.
7.14 GENDER, TENSE AND HEADINGS
Whenever the context so requires, words of the masculine gender used
herein shall include the feminine and neuter, and words used in the singular
shall include the plural. Section headings as used herein are inserted solely
for convenience and reference and constitute no part of the interpretation or
construction of the Plan.
7.15 GOVERNING LAW
The Plan shall be interpreted, construed and constructed in accordance
with the laws of the State of Delaware, except as superseded by applicable the
laws of the United States.
IN WITNESS WHEREOF, Brazos Sportswear, Inc. has caused this Plan to be
duly executed in its name and on its behalf by its duly authorized officer, to
be effective as of July 2, 1997.
BRAZOS SPORTSWEAR, INC.
/s/F.CLAYTON CHAMBERS
By: F. Clayton Chambers, Vice President
and Chief Financial Officer
26
<PAGE>
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PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1997
BRAZOS SPORTSWEAR, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 16, 1997
The undersigned hereby appoints J. Ford Taylor or F. Clayton Chambers,
or either of them, each with power of substitution, attorneys and proxies of the
undersigned to vote all shares of common stock or Series B-2 Preferred Stock of
Brazos Sportswear, Inc. ("Company") which the undersigned is entitled to vote at
the annual meeting of stockholders to be held on September 16, 1997 at the
offices of Equus II Incorporated, 2929 Allen Parkway, Suite 2500, Houston, Texas
77019 at 10:00 a.m., Houston time, and at any adjournments.
1. [ ] FOR the election (except as indicated below) as directors of Randall
B. Hale, J. Ford Taylor, Nolan Lehmann, F. Clayton Chambers, Alan B.
Elenson and Michael S. Chadwick.
INSTRUCTION: TO WITHHOLD VOTE FOR ANY NOMINEE, WRITE THAT NOMINEE'S
NAME BELOW:
___________________________________________________________________
[ ] WITHHOLD authority to vote for all nominees listed above.
2. Proposal to adopt the Charter Amendment.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to adopt the 1997 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(PLEASE DATE AND SIGN ON REVERSE SIDE)
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4. In their discretion, upon such other matters (including procedural and
other matters relating to the conduct of the meeting) as properly come
before the meeting and any adjournment.
As described in the Notice of Annual Meeting of Stockholders, receipt of which
is hereby acknowledged.
This proxy will be voted in accordance with the specifications made hereon. If
no contrary specification is made, it will be voted "FOR" Proposals 1, 2 and 3.
Dated this ____ day of ___________ , 1997
_________________________________________
_________________________________________
Signature(s) of Stockholder
Please sign exactly as your name appears
on your stock certificate. When signing
as executor, administrator, trustee or
other representative, please give your
full title. All joint owners should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY PROMPTLY. PLEASE DO NOT FOLD THIS PROXY.
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