AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1997.
REGISTRATION NO. 333-17871
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SUN SPORTSWEAR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
WASHINGTON 2396 91-1132690
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
KEVIN C. JAMES
6520 SOUTH 190TH STREET SENIOR VICE PRESIDENT AND SECRETARY
KENT, WASHINGTON 98032 SUN SPORTSWEAR, INC.
(206) 251-3565 6520 SOUTH 190TH STREET
(ADDRESS INCLUDING ZIP CODE, AND KENT, WASHINGTON 98032
TELEPHONE (206) 251-3565
NUMBER, INCLUDING AREA CODE, OF (NAME, ADDRESS, INCLUDING ZIP CODE, AND
REGISTRANT'S PRINCIPAL EXECUTIVE TELEPHONE NUMBER, INCLUDING AREA CODE OF
OFFICES) AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
MARION V. LARSON
GRAHAM & JAMES LLP/RIDDELL WILLIAMS RICHARD L. WYNNE
P.S. PORTER & HEDGES, L.L.P.
1001 FOURTH AVENUE PLAZA, SUITE 4500 700 LOUISIANA, 35TH FLOOR
SEATTLE, WASHINGTON 98154-1065 HOUSTON, TEXAS 77002-2370
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article 9 of the Registrant's Restated Articles of
Incorporation and Article 11 of the Registrant's Bylaws provide for
indemnification of the Registrant's directors, officers, employees and agents to
the full extent permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, self dealing or illegal
corporate loans or distributions, or any transactions from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article 9 of the Registrant's Restated
Articles of Incorporation contains provisions implementing, to the full extent
permitted by Washington law, such limitations on a director's liability to the
Registrant and its shareholders.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or contemplated action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action.
In an action brought to obtain a judgment in the corporation's favor,
whether by the corporation itself or derivatively by a stockholder, the
corporation may only indemnify for expenses, including attorneys' fees, actually
and reasonably incurred in connection with the defense or settlement of such
action, and the corporation may not indemnify for amounts paid in satisfaction
of a judgment or in settlement of the claim. In any such action, no
indemnification may be paid in respect of any claim, issue or matter as to which
such person shall have been adjudged liable to the corporation except as
otherwise approved by the Delaware Court of Chancery or the court in which the
claim was brought. In any other type of proceeding, the indemnification may
extend to judgments, fines and amounts paid in settlement, actually and
reasonably incurred in connection with such other proceeding, as well as to
expenses.
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner reasonably believed to
be in, or not opposed to, the best interests of the corporation and, in the case
of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. The statute contains additional limitations
applicable to criminal actions and to actions brought by or in the name of the
corporation. The determination as to whether a person seeking indemnification
has met the required standard of conduct is to be made (1) by a majority vote of
a quorum of disinterested members of the board of directors, (2) by independent
legal counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (3) by the stockholders.
The Certificate of Incorporation and Bylaws of Brazos Delaware require it
to indemnify its directors to the fullest extent authorized by the Delaware
General Corporation Law or any other applicable law in effect, but if such
statute or law is amended, Brazos Delaware may change the standard of
indemnification only to the extent that such amended statute or law permits
Brazos Delaware to provide broader indemnification rights to its directors.
Brazos Delaware's Certificate of Incorporation limits the personal liability of
a director to Brazos Delaware or its stockholders to damages for breach of the
director's fiduciary duty.
Under Section 7.1 of the Merger Agreement (Exhibit 2.1 hereto), to the
extent, if any, not provided by any existing right under one of the parties'
directors' and officers' liability insurance policies, from and
II-1
<PAGE>
after the effective time of the merger, the parties have agreed that the
Registrant will, to the fullest extent permitted by applicable law, indemnify,
defend and hold harmless each person who was, as of November 13, 1996, or was at
any time prior to such date, or who becomes prior to the effective time of the
merger, a director, officer or employee of the parties to the Merger Agreement
or any subsidiary thereof against certain liabilities that are, in whole or in
part, based on, arising out of, or pertaining to the transactions contemplated
by, the Merger Agreement. In addition, to the fullest extent permitted by
applicable law, all existing rights of indemnification will continue in full
force and effect for a period of not less than six years from the effective time
of the merger. Section 7.1(b) of the Merger Agreement requires that for a period
of four years after the effective time of the merger, the Registrant shall
maintain policies of directors' and officers' liability insurance maintained by
Sun, or so much of such insurance as can be so maintained or obtained at a cost
equal to $50,000 annually.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------------------------
2.1 -- Agreement and Plan of Merger dated as of November 13,
1996 by and between the Registrant and BSI Holdings,
Inc. (included as Appendix A to the Joint Proxy
Statement/Prospectus)
3.1 -- Restated Articles of Incorporation of the Registrant
(Filed as an exhibit to Form S-1 Registration Statement
(No. 33-31688), and incorporated herein by reference.)
3.2 -- Bylaws of the Registrant (Filed as an exhibit to Form
10-K for the year ended December 31, 1991 and
incorporated herein by reference.)
*5.1 -- Opinion of Graham & James LLP/Riddell Williams P.S. as
to the legality of the securities being registered
**8.1 -- Opinion of Graham & James LLP/Riddell Williams, P.C.
**8.2 -- Opinion of Porter & Hedges, L.L.P.
10.1 -- 1989 Employee Stock Option Plan of the Registrant
(Filed as an exhibit to Form S-1 Registration Statement
(No. 33-31688), and incorporated herein by reference.)
10.2.1 -- 1989 Director Stock Option Plan of the Registrant, as
amended (Filed as an exhibit to Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference.)
10.4 -- Industrial Lease, dated April 3, 1989, between the
Registrant and Sabey Corporation (Filed as an exhibit
to Form S-1 Registration Statement (No. 33-31688), and
incorporated herein by reference.)
10.9 -- Tax Claims and Access Agreement, dated as of October 6,
1989, between the Registrant and David A. Sabey (Filed
as an exhibit to Form S-1 Registration Statement (No.
33-31688), and incorporated herein by reference.)
10.12 -- Form of Indemnification Agreement between the Company
and its directors (Filed as an exhibit to Form 10-K for
the year ended December 31, 1991 and incorporated
herein by reference.)
*10.18 -- Termination Agreement between Registrant and Kevin
James, Senior Vice President and Chief Financial
Officer.
10.19 -- Employment Agreement between Registrant and L. Kaye
Counts, Executive Vice President and Chief Operating
Officer (Filed as an exhibit to Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference.)
*10.19.1 -- Addendum to Employment Agreement between Registrant and
L. Kaye Counts, Executive Vice President and Chief
Operating Officer.
10.23.1 -- Employment Agreement between Registrant and Sandra L.
Teufel, Senior Vice President -- Sales and
Merchandising (Filed as an exhibit to Form 10-K for the
year ended December 31, 1995 and incorporated herein by
reference.)
10.27 -- Credit Agreement, dated as of February 13, 1996,
between the Registrant and Heller Financial, Inc.
(Filed as an exhibit to Form 10-K for the year ended
December 31, 1995 and incorporated herein by
reference.)
II-2
<PAGE>
*10.27.1 -- Second Amendment to Credit Agreement between the
Registrant and Heller Financial, Inc.
*11.1 -- BSI Holdings, Inc. Computation of Earnings (Loss) Per
Common Share
*11.2 -- Computations of Pro Forma Combined Earnings (Loss) Per
Common Share
*23.1 -- Consent of Price Waterhouse LLP
*23.2 -- Consent of Arthur Andersen LLP
*23.3 -- Consent of Mahoney Cohen Rashba & Pokart, CPA, PC
*23.4 -- Consent of Graham & James LLP/Riddell Williams P.S.
(contained in the opinion filed as Exhibit 5.1)
*23.5 -- Consent of Rodman & Renshaw, Inc. with respect to its
fairness opinion
*24.1 -- Power of Attorney (included on signature page)
*99.1 -- Form of Proxy for annual meeting of shareholders of the
Registrant
*99.2 -- Form of Proxy for special meeting of shareholders of
BSI Holdings, Inc.
*99.3 -- Form of Election for Sun Shareholders electing not to
receive cash consideration
*99.4 -- Consent of persons named in the Registration Statement
as about to become a director who have not signed the
Registration Statement to be filed pursuant to Rule
438.
- ------------
* Previously filed.
** Filed herewith.
(a) FINANCIAL STATEMENT SCHEDULES
None.
(b) REPORTS, OPINIONS AND APPRAISALS
Opinion of Rodman & Renshaw, Inc. (included as Appendix B to the Joint
Proxy Statement/Prospectus)
ITEMS 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-3
<PAGE>
(a) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this Registration Statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(b) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents
by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(e) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF KENT, STATE OF
WASHINGTON, ON THE 14TH DAY OF FEBRUARY, 1997.
SUN SPORTSWEAR, INC.
By: /s/ KEVIN C. JAMES
KEVIN C. JAMES
SENIOR VICE PRESIDENT, SECRETARY
AND CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED BELOW ON THE 14TH DAY OF FEBRUARY, 1997.
SIGNATURE TITLE
- -------------------------------------------------------------------------
* Chairman of the Board
WILLIAM S. WILEY President, Chief Executive Officer
and Director (Principal Executive Officer)
/s/KEVIN C. JAMES Senior Vice President, Secretary and
KEVIN C. JAMES Chief Financial Officer
(Principal Financial Officer)
* Controller (Principal Accounting
MICHAEL J. SANDHORST Officer)
* Director
LARRY C. MOUNGER
* Director
JAMES A. WALSH
________________________________ Director
JAMES H. WILLIAMS
* Director
PAUL R. ROLLINS, JR.
*By: /s/KEVIN C. JAMES
KEVIN C. JAMES
SENIOR VICE PRESIDENT, SECRETARY
AND CHIEF FINANCIAL OFFICER
AS ATTORNEY-IN-FACT
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- -------------------------------------------------------------------------------
2.1 -- Agreement and Plan of Merger dated as of November 13,
1996 by and between the Registrant and BSI Holdings,
Inc. (included as Appendix A to the Joint Proxy
Statement/Prospectus)
3.1 -- Restated Articles of Incorporation of the Registrant
(Filed as an exhibit to Form S-1 Registration Statement
(No. 33-31688), and incorporated herein by reference.)
3.2 -- Bylaws of the Registrant (Filed as an exhibit to Form
10-K for the year ended December 31, 1991 and
incorporated herein by reference.)
*5.1 -- Opinion of Graham & James LLP/Riddell Williams P.S. as
to the legality of the securities being registered
**8.1 -- Opinion of Graham & James LLP/Riddell Williams, P.C.
**8.2 -- Opinion of Porter & Hedges, L.L.P.
10.1 -- 1989 Employee Stock Option Plan of the Registrant
(Filed as an exhibit to Form S-1 Registration Statement
(No. 33-31688), and incorporated herein by reference.)
10.2.1 -- 1989 Director Stock Option Plan of the Registrant, as
amended (Filed as an exhibit to Form 10-Q for the
quarter ended June 30, 1995 and incorporated herein by
reference.)
10.4 -- Industrial Lease, dated April 3, 1989, between the
Registrant and Sabey Corporation (Filed as an exhibit
to Form S-1 Registration Statement (No. 33-31688), and
incorporated herein by reference.)
10.9 -- Tax Claims and Access Agreement, dated as of October 6,
1989, between the Registrant and David A. Sabey (Filed
as an exhibit to Form S-1 Registration Statement (No.
33-31688), and incorporated herein by reference.)
10.12 -- Form of Indemnification Agreement between the Company
and its directors (Filed as an exhibit to Form 10-K for
the year ended December 31, 1991 and incorporated
herein by reference.)
*10.18 -- Termination Agreement between Registrant and Kevin
James, Senior Vice President and Chief Financial
Officer.
10.19 -- Employment Agreement between Registrant and L. Kaye
Counts, Executive Vice President and Chief Operating
Officer (Filed as an exhibit to Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference.)
*10.19.1 -- Addendum to Employment Agreement between Registrant and
L. Kaye Counts, Executive Vice President and Chief
Operating Officer.
10.23.1 -- Employment Agreement between Registrant and Sandra L.
Teufel, Senior Vice President -- Sales and
Merchandising (Filed as an exhibit to Form 10-K for the
year ended December 31, 1995 and incorporated herein by
reference.)
10.27 -- Credit Agreement, dated as of February 13, 1996,
between the Registrant and Heller Financial, Inc.
(Filed as an exhibit to Form 10-K for the year ended
December 31, 1995 and incorporated herein by
reference.)
*10.27.1 -- Second Amendment to Credit Agreement between the
Registrant and Heller Financial, Inc.
*11.1 -- BSI Holdings, Inc. Computation of Earnings (Loss) Per
Common Share
*11.2 -- Computations of Pro Forma Combined Earnings (Loss) Per
Common Share
*23.1 -- Consent of Price Waterhouse LLP
*23.2 -- Consent of Arthur Andersen LLP
*23.3 -- Consent of Mahoney Cohen Rashba & Pokart, CPA, PC
**23.4 -- Consent of Graham & James LLP/Riddell Williams P.S.
(contained in the opinion filed as Exhibit 5.1)
*23.5 -- Consent of Rodman & Renshaw, Inc. with respect to its
fairness opinion
*24.1 -- Power of Attorney (included on signature page)
*99.1 -- Form of Proxy for annual meeting of shareholders of the
Registrant
*99.2 -- Form of Proxy for special meeting of shareholders of
BSI Holdings, Inc.
*99.3 -- Form of Election for Sun Shareholders electing not to
receive cash consideration
*99.4 -- Consent of persons named in the Registration Statement
as about to become a director who have not signed the
Registration Statement to be filed pursuant to Rule
438.
- ------------
* Previously filed.
** Filed herewith.
EXHIBIT 8.1
[Letterhead of]
GRAHAM & JAMES LLP LOGO
February 13, 1997
Sun Sportswear, Inc.
6520 South 190th Street
Kent, WA 98032
Gentlemen:
This opinion is being delivered to you in accordance with Section 5.2.4 of the
Plan and Agreement of Merger dated as of November 13, 1996, as amended by the
First Amendment to Plan and Agreement of Merger dated December 13, 1996 (such
Plan and Agreement of Merger, as amended, being the "Agreement") by and between
Sun Sportswear, Inc., a Washington corporation ("Acquiror"), and BSI Holdings,
Inc., a Delaware corporation ("Target"). Pursuant to the Agreement, Target will
merge with and into Acquiror.
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Agreement or in certificates delivered to us by
Acquiror and Target containing certain representations of Acquiror and Target,
copies of which are attached as Exhibits hereto. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as counsel to Acquiror in connection with the Merger. As such, and
for the purpose of rendering this opinion, we have examined and are relying upon
(without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents (including all exhibits and
schedules attached thereto):
(a) the Agreement;
(b) The Registration Statement on Form S-4 filed by Acquiror with the
Securities and Exchange Commission relating to the Merger (the "Registration
Statement";
(c) Continuity of Interest Certificates from certain Target shareholders (the
"Continuity of Interest Certificates");
(d) An officer's certificate dated February 13, 1997 addressed to us signed by
an authorized officer of Acquiror and delivered to us from Acquiror in the form
attached hereto as Exhibit A and incorporated hereby reference;
(e) An officer's certificate dated February 13, 1997 addressed to us signed by
an authorized officer of Target and
<PAGE>
delivered to us from Target in the form attached hereto as Exhibit B and
incorporated hereby by reference;
(f) such other instruments and documents related to the formation,
organization and operation of Acquiror and Target and related to the
consummation of the Merger and the transactions contemplated thereby as we have
deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon), without any independent investigation
or review thereof, that:
1. Original documents (including signatures thereto) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to
effectiveness thereof;
2. All representations, warranties and statements made or agreed to by
Acquiror, Target and Target shareholders, including but not limited to, those
set forth in the Agreement (including all exhibits and schedules attached
thereto), the officer's certificates attached hereto and the Continuity of
Interest Certificates, are and will be true and accurate at all relevant times;
3. All covenants contained in the Agreement (including all exhibits thereto),
the officer's certificates attached hereto and the Continuity of Interest
Certificates will be performed without waiver or breach of any material
provision thereof;
4. The continuity of interest requirement as specified in Treas. Reg. Section
1.368-1(b) and as interpreted in certain Internal Revenue Service rulings and
federal judicial decisions will be satisfied; and
5. The only property being distributed to any holder of Sun Common Stock in
the Merger is a Subordinated Note.
Based on the foregoing documents, materials, assumptions and information, and
subject to the qualifications and assumptions set forth herein, our opinions are
that if the Merger is consummated in accordance with the provisions of the
Agreement and the exhibits thereto:
<PAGE>
I. The Merger of Target with and into Acquiror, with Acquiror surviving the
Merger, will qualify as a reorganization within the meaning of Section
368(a) of the Code.
II. No gain or loss will be recognized by any holder of Sun Common Stock as a
result of the Merger, except in the case of cash or the Subordinated Note
paid to those holders of Sun Common Stock who do not properly elect to
retain their shares of Sun Common Stock and thus receive the cash
consideration or the Subordinated Note, and except for cash paid to
holders of Sun Common Stock who dissent from the Merger or cash paid in
lieu of fractional shares.
Our opinions set forth above are based on the existing provisions of the Code,
Treasury Regulations (including Temporary and Proposed Treasury Regulations)
promulgated under the Code, published Revenue Rulings, Revenue Procedures and
other announcements of the Internal Revenue Service (the "Service") and existing
court decisions, any of which could be changed at any time. Any such changes
might be retroactive with respect to transactions entered into prior to the date
of such changes and could significantly modify the opinion set forth above.
Nevertheless, we undertake no responsibility to advise you of any subsequent
developments in the application, operation or interpretation of the federal
income tax laws.
Our opinion concerning certain of the federal tax consequences of the Merger is
limited to the specific federal tax consequences presented above. No opinion is
expressed as to any transaction other than the Merger, including any transaction
undertaken in connection with the Merger. In addition, this opinion does not
address any estate, gift, state, or local or foreign tax consequences that may
result from the Merger. In particular, we express no opinion regarding: (i) the
amount, existence, or availability after the Merger, of any of the federal
income tax attributes of Target or Acquiror (including, without limitation,
foreign tax credits or net operating loss carryforwards, if any, of Target or
Acquiror); (ii) any transaction in which Target capital stock is acquired or
Acquiror common stock is disposed; (iii) the potential application of the
"disqualifying disposition" rules of Section 421 to dispositions of Target
common stock; (iv) the effects of the Merger and Acquiror's assumption of
outstanding options to acquire Target common stock on the holders of such
options under any Target employee stock option or stock purchase plan; (v) the
effects of the Merger on any Target
<PAGE>
shareholder who pursuant to the Merger exchanges Target stock that was acquired
subject to the provisions of Section 83(a) of the Code; (vi) the effects of the
Merger on any payment which is or may be subject to the provisions of Section
280G of the Code; and (vii) the application of the collapsible corporation
provisions of Section 341 of the Code to Acquiror or Target as a result of the
Merger.
This opinion is being delivered solely pursuant to Section 5.2.4 of the
Agreement. We consent to the use of this opinion as an exhibit to the
Registration Statement on Form S-4 filed by Acquiror and to the references to us
under the caption "The Merger -- Certain Federal Income Tax Consequences'' in
the Joint Proxy Statement/Prospectus filing as part of the Registration
Statement. It may not be relied upon or utilized for any other purpose or by any
other person or entity, and may not be made available to any other person or
entity without our prior written consent.
Very truly yours,
/s/ GRAHAM & JAMES LLP
GRAHAM & JAMES LLP
Attachments:
Exhibit A -- An officer's certificate dated February 13, 1997 addressed to
us signed by an authorized officers of Acquiror.
Exhibit B -- An officer's certificate dated February 13, 1997 addressed to us
signed by an authorized officer of Target.
EXHIBIT 8.2
February 13, 1997
BSI Holdings, Inc.
3860 Virginia Ave.
Cincinnati, Ohio 45227
Ladies and Gentlemen:
We have acted as counsel to BSI Holdings, Inc., a Delaware corporation
("BSI"), in connection with the transactions contemplated by the Plan and
Agreement of Merger dated November 13, 1996, as amended by the First Amendment
to Plan and Agreement of Merger dated December 13, 1996 (the "Merger
Agreement"), by and among BSI and Sun Sportswear, Inc., a Washington corporation
("Sun"). We have been requested by BSI to render our opinion with respect to the
material federal income tax consequences of the proposed merger (the "Merger")
of BSI with and into Sun in accordance with the Merger Agreement, with Sun to be
the surviving corporation. As a result of the Merger, all of the outstanding
shares of BSI Common Stock and BSI Preferred Stock will be converted into shares
of Sun Common Stock and Sun Preferred Stock, except for cash paid to BSI
stockholders on perfection of dissenters' rights or in lieu of receipt of
fractional shares of Sun Common Stock. All capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Merger Agreement.
We have examined (i) executed copies of the Merger Agreement, (ii) the
Registration Statement on Form S-4 filed by Sun (Registration No. 333-17871),
and (iii) have examined or relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records, documents,
certificates and other instruments, as we have deemed necessary or appropriate
for the purpose of rendering the opinions expressed below. As to certain
questions of fact material to the opinions rendered herein, we have relied upon
certificates, warranties and covenants made to us by the management of Sun and
BSI, as well as certificates of continuity of interest from shareholders of BSI
(each of which we have relied upon as true in this opinion without our having
performed any independent verification as to their accuracy). We have assumed
that the Merger qualifies as a statutory merger under applicable state law. We
have further assumed that all signatures on all documents we have examined are
genuine, that all documents submitted to us as originals are authentic and that
all copies of documents submitted to us are complete and conform to the
originals thereof.
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 2
In addition, for purposes of rendering this opinion, we have also relied
on the following assumptions which are based on representations by Sun, BSI and
certain BSI stockholders:
(a) Sun has no plan or intention to (i) reacquire any of its
Common or Preferred Stock, or (ii) sell or otherwise dispose of any assets of
BSI acquired in the Merger except for dispositions made in the ordinary course
of business or transfers described in ss.368(a)(2)(C) other than to exchange
shares of Sun Common Stock and Sun Preferred Stock received in the Merger for
shares of common stock and preferred stock of Brazos Sportswear, Inc., a
Delaware corporation and wholly owned subsidiary of Sun ("Brazos"), pursuant to
the reincorporation of Sun immediately subsequent to the Merger by means of a
merger of Sun with and into Brazos (the "Sun Reincorporation").
(b) There is no intercorporate indebtedness existing between Sun
and BSI that was issued, acquired or will be settled at a discount.
(c) The payment of cash to BSI stockholders in lieu of the
issuance of fractional shares of Sun Common Stock in the Merger is solely for
the purpose of avoiding the expense and inconvenience to Sun of issuing
fractional shares and does not represent separately bargained for consideration.
The total cash payment to BSI stockholders in lieu of issuing fractional shares
will not exceed 1% of the total consideration that will be issued in the Merger
to the BSI stockholders in exchange for their BSI stock interests. The
fractional share interests in Sun Common Stock of each BSI stockholder will be
aggregated, and no BSI stockholder will receive cash payments with respect to
such fractional shares in an amount equal to or greater than the value of one
full share of Sun Common Stock, as determined in accordance with Section 1.9.4.4
of the Merger Agreement.
(d) Following the Effective Date of the Merger, Sun will continue
the historic business of BSI or use a significant portion of BSI's historic
business assets in a business within the meaning of Treasury Regulation Section
1.368-1(d).
(e) The fair market value of the Sun Common Stock and Sun
Preferred Stock and other consideration, if any, received by each BSI
stockholder will be approximately equal to the fair market value of the BSI
Common Stock and/or BSI Preferred Stock surrendered by such stockholder in the
Merger. We have, with the consent of BSI, reviewed the fairness opinion of
Rodman & Renshaw and note that the conclusions of that opinion are consistent
with this assumption.
(f) Except for the Sun Reincorporation, there is no present plan
or intention by the BSI stockholders who own 1% or more of the BSI Common Stock
or BSI Preferred Stock and, to the best knowledge of BSI Management, there is no
plan or intention on the part of the remaining BSI stockholders, to sell,
exchange or otherwise dispose of a number of shares of Sun Common
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 3
Stock or Sun Preferred Stock received in the Merger that would reduce BSI
stockholders' ownership of Sun Common Stock and Sun Preferred Stock to a number
of shares having a value, as of the date of the Merger, of less than fifty
percent of the value of all of the shares of BSI Common Stock and
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 4
BSI Preferred Stock issued and outstanding immediately prior to the Merger. For
purposes of this assumption, shares of BSI Common Stock or BSI Preferred Stock
exchanged for cash or other property, surrendered by dissenters or exchanged for
cash in lieu of fractional shares of Sun Common Stock and/or Sun Preferred Stock
will be treated as outstanding BSI Common Stock and BSI Preferred Stock
immediately prior to the Merger. Moreover, shares of BSI Common Stock or BSI
Preferred Stock held by BSI stockholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the Merger are taken into account in making
this determination.
(g) The liabilities of BSI assumed by Sun, if any, and the
liabilities to which the transferred assets of BSI are subject, if any, were
incurred by BSI in the ordinary course of its business.
(h) Each of the parties to the Merger and the BSI stockholders
will pay their respective expenses, if any, incurred in connection with the
Merger.
(i) No two parties to the Merger are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) BSI is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(k) At the Effective Date of the Merger, the fair market value of
the assets of BSI will equal or exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which those assets are subject.
(l) None of the compensation received or to be received by any
stockholder- employee of BSI, will be separate consideration for, or allocable
to, any of their shares of BSI Common Stock and/or BSI Preferred Stock. None of
the shares of Sun Common Stock or Sun Preferred Stock received by any
stockholder-employee of BSI pursuant to the Merger will be separate
consideration for, or allocable to, any employment agreement. Any compensation
paid to any stockholder-employee of BSI subsequent to the Merger will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
(m) Following the Effective Date of the Merger, Sun and BSI will
comply with all federal income tax reporting requirements mandated by the Code
and, to the best knowledge of the management of BSI and Sun, there is no plan or
intention on the part of the BSI or Sun stockholders not to comply with such
reporting requirements.
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 5
Based on the representations and qualifications contained herein, and
assuming further that the Merger is carried out in the manner set forth in the
Merger Agreement and the Registration Statement, we are of the opinion that the
following are the material federal income tax consequences resulting from the
consummation of the Merger and that:
1. The Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) of the Code and BSI and Sun will be a party to a
reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by BSI as a result of the Merger.
3. No gain or loss will be recognized by any BSI stockholder with
respect to the exchange of their BSI Common Stock solely for Sun Common Stock
pursuant to the Merger, except in the case of cash paid to dissenters or cash
paid in lieu of issuing fractional shares of Sun Common Stock.
4. No gain or loss will be recognized by any BSI stockholder with
respect to the exchange of their BSI Preferred Stock solely for Sun Preferred
Stock pursuant to the Merger, except in the case of cash paid to dissenters or
cash paid in lieu of issuing fractional shares of Sun Preferred Stock.
5. The payment of cash to a BSI stockholder in lieu of a fractional
share interest in Sun Common Stock will be treated as if the fractional share
interest was distributed as part of the Merger and then redeemed by Sun.
Accordingly, the tax consequences of such a cash payment will be determined in
accordance with Section 302 of the Code. Unless the redemption is essentially
equivalent to a dividend, such a redemption will be treated as a sale or
exchange of the fractional share interest under Section 302 of the Code and gain
or loss (which will constitute capital gain or loss if the related BSI Common
Stock and/or BSI Preferred Stock was held as a capital asset) will be recognized
by the stockholder measured by the difference between the cash or other property
received in lieu of the fractional share and the portion of the BSI
stockholder's tax basis that is allocated to such fractional share.
A redemption of BSI stockholders' fractional share interest in
Sun will not be essentially equivalent to a dividend if such stockholder incurs
a "meaningful reduction" in his proportionate equity interest in Sun by reason
of the redemption. Although the determination of whether there has been a
meaningful reduction is a factual matter in which no opinion is being given
hereunder, generally a redemption of public company shares held by a minority
stockholder will be treated as a meaningful reduction where such stockholder's
proportionate equity interest in the corporation has been reduced.
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 6
6. The aggregate tax basis of the Sun Common Stock and/or Sun Preferred
Stock received by a BSI stockholder in the Merger will be the same as the
aggregate tax basis of the BSI Common Stock and/or BSI Preferred Stock exchanged
for the Sun Common Stock and/or Sun Preferred Stock (less any portion of such
basis allocable to fractional shares redeemed for cash).
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 7
7. The holding period of Sun Common Stock and/or Sun Preferred Stock
(including any fractional shares deemed issued and then redeemed) received by a
BSI stockholder in exchange for the BSI Common Stock and/or BSI Preferred Stock
pursuant to the Merger will include the holding period of the BSI Common Stock
and/or BSI Preferred Stock that was converted into the Sun Common Stock and/or
Sun Preferred Stock, provided that such BSI Common Stock and/or BSI Preferred
Stock was held as a capital asset at the time of the Merger.
8. No gain or loss will be recognized by the holders of compensatory
options to purchase BSI Common Stock upon the receipt of options to purchase Sun
Common Stock due to the conversion of their BSI options. However, we note that
such holders may recognize compensation income upon the future exercise or
disposition of such options.
The foregoing opinions are qualified, and no opinions are expressed, as
to the federal income tax consequences, if any, with respect to the following
matters due to the uncertainty of the law regarding such matters:
(i) We are expressing no opinion regarding the federal income tax
consequences of the conversion of BSI warrants into warrants to purchase Sun
Common Stock since the Treasury Regulations take the position that warrants are
neither stock nor securities qualifying for tax free treatment.
(ii) The ability of Sun or the Sun consolidated group to utilize net
operating loss carryforwards of Sun and BSI subsequent to the Merger may be
restricted due to the occurrence of an "ownership change" under Section 382 of
the Code as a result of the Merger, as well as the application of the
consolidated return regulations under Section 1502 of the Code. Such limitations
could defer, and possibly eliminate, any potential tax benefit from offsetting
such net operating loss carryforwards against future income of Sun or the Sun
consolidated group.
(iii) We are expressing no opinion regarding the federal income tax
consequences of the redemption of Sun Common Stock owned by existing Sun
stockholders pursuant to the Merger. However, we note that we believe that such
redemption will not affect the requirement that there be continuity of interest
by the target corporation shareholders after a reorganization within the meaning
of ss.368(a)(1)(A) because BSI will be considered to be the target corporation.
Our opinion has been requested by BSI on behalf of (i) itself, (ii) the
BSI stockholders receiving Sun Common Stock and/or Sun Preferred Stock in
exchange for BSI Common Stock and/or BSI Preferred Stock pursuant to the Merger,
(iii) the holders of compensatory options to purchase BSI Common Stock that are
receiving options to purchase Sun Common Stock pursuant
<PAGE>
BSI Holdings, Inc.
February 13, 1997
Page 8
to the Merger, and (iv) the holders of warrants to purchase BSI Common Stock
that are receiving warrants to purchase Sun Common Stock pursuant to the Merger.
No other individual or entity, whether or not party to the Merger Agreement, may
rely upon this opinion without the express, prior written consent of both BSI
and the undersigned.
Our opinion is limited to the matters discussed herein. The opinion does
not deal with the specific circumstances of any particular BSI stockholder, nor
does it cover the application of state, local, foreign or other tax laws. In
particular, the conclusions herein regarding the treatment of BSI stockholders
may not be applicable to BSI stockholders who hold BSI capital stock as part of
a straddle or hedge, or are dealers in securities, insurance companies, tax
exempt organizations, financial institutions, broker-dealers, S-corporations,
foreign corporations, or persons who are not citizens or residents of the United
States.
We note that the opinion of counsel has no binding effect or official
status of any kind with the Internal Revenue Service or the courts. We believe
that subject to the conditions and assumptions noted above, it is more likely
than not that the conclusions set forth herein would be sustained by the courts
if contested by the Internal Revenue Service. However, due to uncertainties
inherent in the application of federal tax laws to the Merger, there can be no
assurance of such success. If there were ultimately an adverse determination as
to any of the tax issues discussed herein or in the Registration Statement, Sun,
BSI and the BSI stockholders could sustain different tax consequences than are
described herein or in the Registration Statement. Further, our opinion is based
upon existing laws, regulations, administrative authorities and judicial
decisions, all of which could change with retroactive effect. We have no duty,
and do not intend, to update or modify this opinion for changes in the
applicable law, regulations or interpretations occurring after the date hereof.
Similarly, any change in the facts and assumptions stated above, upon which this
opinion is based, could modify our conclusions.
We consent to the use of this opinion as an exhibit to the Registration
Statement on Form S-4 filed by Sun and to the reference to us under the caption
"The Merger--Certain Federal Income Tax Consequences" in the Joint Proxy
Statement/Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ PORTER & HEDGES, L.L.P.
PORTER & HEDGES, L.L.P.
