<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SPORT-HALEY, INC.
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(Name of Registrant as Specified in Its Charter)
---------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than 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 securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 16, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Sport-Haley, Inc. will be held at the Marriott Courtyard, 17010 North Scottsdale
Road, Scottsdale, Arizona on Tuesday, February 16, 1999, at 4:00 p.m., Mountain
Time, and thereafter as it may from time to time be adjourned, for the following
purposes:
1. To elect five directors to hold office for the term set forth in
the accompanying Proxy Statement and until their successors shall
have been duly elected and qualified;
2. To ratify the appointment of Levine Hughes & Mithuen, Inc. as
independent auditors; and
3. To consider and transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 17,
1998, as the record date for the determination of shareholders entitled to
notice of and to vote at this meeting or any adjournment thereof.
By Order of the Board of Directors,
December 17, 1998 /s/ Steve S. Auger
---------------------------------------
Steve S. Auger, Corporate Secretary
IMPORTANT
PLEASE MARK, DATE, SIGN, NOTE ANY CHANGE OF ADDRESS AND RETURN THE ENCLOSED
PROXY CARD IMMEDIATELY IN THE ENCLOSED, SELF-ADDRESSED ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, WE WILL BE
GLAD TO RETURN YOUR PROXY SO THAT YOU MAY VOTE IN PERSON.
<PAGE>
SPORT-HALEY, INC.
4600 E. 48TH AVENUE
DENVER, COLORADO 80216
PROXY STATEMENT
RELATING TO THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD FEBRUARY 16, 1999
GENERAL
The enclosed proxy is solicited by the Board of Directors of
Sport-Haley, Inc. (hereinafter referred to as the "Company") for use at the
Annual Meeting of Shareholders to be held at the Marriott Courtyard, 17010 North
Scottsdale Road, Scottsdale, Arizona on Tuesday, February 16, 1999, at 4:00
p.m., Mountain Time, for the purposes set forth in the foregoing Notice of
Annual Meeting of Shareholders. This Proxy Statement and the form of proxy will
be mailed to shareholders on or about December 22, 1998.
The record date with respect to this solicitation is December 17, 1998.
All holders of record of Common Stock of Sport-Haley, Inc. as of the close of
business on that date are entitled to vote at the meeting. As of the record
date, the Company had 4,408,362 shares of Common Stock outstanding, excluding
treasury shares. Each share of Common Stock is entitled to one vote. A
majority of the votes entitled to be cast constitutes a quorum. If a quorum
exists, action on any matter other than the election of directors will be
approved if the votes cast in person or by proxy at the meeting favoring the
action exceed the votes cast opposing the action. In the election of directors,
that number of candidates equaling the number of directors to be elected having
the highest number of votes cast in favor of their election will be elected.
Abstentions and broker non-votes are not counted in the calculation of the vote.
A proxy may be revoked by the shareholder at any time prior to its being
voted. If a proxy is properly signed and is not revoked by the shareholder, the
shares it represents will be voted at the meeting in accordance with the
instructions of the shareholder, unless it is received in such form as to render
it invalid. If the proxy is signed and returned without specifying choices, the
shares will be voted in accordance with the recommendations of the Board of
Directors.
As a matter of policy, proxies, ballots and voting tabulations that
identify individual shareholders are held confidential by the Company. Such
documents are available for examination only by the inspectors of election, none
of whom is an employee of the Company, and certain employees associated with
tabulation of the vote. The identity of the vote of any shareholder is not
disclosed except as may be necessary to meet legal requirements.
The cost of this solicitation will be borne by the Company. Employees
and directors of the Company may solicit proxies but will not receive any
additional compensation for such solicitation. Proxies may be solicited
personally or by mail, facsimile, telephone or telegraph.
<PAGE>
I. ELECTION OF DIRECTORS
Information concerning the five nominees for election as directors is
shown below. All nominees are now members of the Board of Directors. The Board
of Directors knows of no reason why any nominee would be unable to serve as a
director. If any nominee should for any reason become unable to serve, the
shares represented by all valid proxies will be voted for the election of such
other person as the Board of Directors may designate or the Board of Directors
may reduce the number of directors to eliminate the vacancy.
<TABLE>
<CAPTION>
NAME AGE CAPACITIES IN WHICH SERVED
-------------- --- -------------------------------------
<S> <C> <C>
Robert G. Tomlinson(1) 57 Chairman of the Board and Chief Executive
Officer
Robert W. Haley 53 President and Director
Mark J. Stevenson(1)(2) 60 Director
Ronald J. Norick(2) 57 Director
James H. Everest(1)(2) 50 Director
</TABLE>
___________________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
ROBERT G. TOMLINSON has served as Chairman of the Board and Chief
Executive Officer of the Company since October 1992. Since March 1998, he has
also served as a director of B & L Sportswear, Inc. (the "Subsidiary"). Prior
to joining the Company, Mr. Tomlinson was a partner in Tomlinson Enterprises, a
real estate investment partnership, and also engaged in management of his
personal investment portfolio. Mr. Tomlinson is the father of Kevin Tomlinson,
the Vice President of Operations of the Company.
ROBERT W. HALEY has served as President and a director of the Company
since May 30, 1996. From January 1992 until his appointment to such positions,
he served as Vice President of Marketing of the Company. Prior to joining the
Company, Mr. Haley served in various marketing positions for golf apparel
manufacturers. Mr. Haley is a Class A PGA professional golfer with 25 years
experience in the golf industry.
MARK J. STEVENSON has been a director of the Company since November
1993. Since June 1, 1994, Mr. Stevenson has served as chairman of the board,
president and chief executive officer of Electronic Manufacturing Systems,
Longmont, Colorado, a contract manufacturer serving the computer, data storage,
telecommunications and medical equipment industries. From 1992 to 1994, Mr.
Stevenson served as chairman of the board of Micro Insurance Software, Inc.,
Boulder, Colorado, a manufacturer of computer software oriented to the insurance
industry.
RONALD J. NORICK has been a director of the Company since November 1993.
From April 1987 until April 1998, Mr. Norick served as the elected Mayor of the
City of Oklahoma City, Oklahoma. From 1960 to 1992, Mr. Norick served in
various capacities, including serving as president from 1981 to 1992, of a
closely-held printing company which was acquired by Reynolds & Reynolds in June
1992. Mr. Norick serves as manager of Norick Investments Company LLC, a
family-owned limited liability company which is engaged in investments.
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<PAGE>
JAMES H. EVEREST has been a director of the Company since November 1993.
Mr. Everest has served as president of the Jean I. Everest Foundation, Oklahoma
City, Oklahoma, since 1991. The Jean I. Everest Foundation was organized by Mr.
Everest's father to conduct charitable activities. Mr. Everest has been the
managing partner of Everest Brothers, a general partnership active in oil and
gas exploration and development, since 1984. Mr. Everest has also been engaged
in managing his personal investments since 1984. Mr. Everest is a member of the
Oklahoma Bar Association and the American Bar Association.
COMMITTEES OF THE BOARD
The Board of Directors has delegated certain of its authority to a
Compensation Committee and an Audit Committee. The Compensation Committee is
composed of Messrs. Stevenson, Norick and Everest. The Audit Committee is
composed of Messrs. Tomlinson, Stevenson and Everest. No member of either
committee is a former or current officer or employee of the Company with the
exception of Mr. Tomlinson.
The Compensation Committee held two meetings in fiscal 1998. The
primary function of the Compensation Committee is to review and make
recommendations to the Board with respect to the compensation, including
bonuses, of the Company's officers and to administer the Company's Option Plan.
See "- Compensation Committee Report."
The Audit Committee had no formal meetings in fiscal 1998. The
function of the Audit Committee is to review and approve the scope of audit
procedures employed by the Company's independent auditors, to review and approve
the audit reports rendered by the Company's independent auditors and to approve
the audit fee charged by the independent auditors. The Audit Committee reports
to the Board of Directors with respect to such matters and recommends the
selection of independent auditors.
BOARD AND COMMITTEE ATTENDANCE
In fiscal 1998, the Board of Directors held two meetings. Each director
except Mark Stevenson attended all board and committee meetings held during
fiscal 1998.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Officers are appointed by and serve at the discretion of the Board of
Directors. Each of the Company's officers devote full-time to the Company's
business and affairs.
STEVE S. AUGER, age 53, has served as Controller of the Company since
July 1993. In January 1996, he was appointed Secretary and Treasurer. Since
March 1998, he has also served as a director of the Subsidiary and as its
Secretary and Treasurer.
CATHERINE B. BLAIR, age 47, has served as Vice President of
Merchandising/Design since her appointment in May 1996. Ms. Blair has been part
of the Company's design team since 1992, and was appointed Director of Design in
1995.
KEVIN M. TOMLINSON, age 39, has served as Vice President of Operations
since December 1997. From 1992 until joining the Company, Mr. Tomlinson was
employed by Nu-Kote International, Inc., an office products manufacturer and
distributor, in capacities including vice president of product marketing, vice
president of marketing, vice president of global procurement and vice president
of retail sales. Mr. Tomlinson is the son of Robert G. Tomlinson, the Chairman
and Chief Executive Officer of the Company.
-3-
<PAGE>
GRANT M. BEEMAN, age 39, has served as Vice President of Manufacturing
since November 1997 and has also served as a Vice President of the Subsidiary
from March 1998. From September 1992 until joining the Company, Mr. Beeman was
employed by Carlyle Golf, Inc., a Denver based manufacturer of men's golf
apparel, as vice president of manufacturing and design.
WILLIAM L. BLAIR, age 56, has served as Vice President of Corporate
Sales since March 1998. From September 1996 until joining the Company, Mr. Blair
was director of marketing for the Activewear Division of Fruit of the Loom.
From 1992 to 1996, Mr. Blair was a director of and consultant to Osterman API,
Inc., a promotional product company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the annual
and long-term compensation for services in all capacities to the Company for the
three fiscal years ended June 30, 1998 of Robert G. Tomlinson, the Chief
Executive Officer, and Robert W. Haley, President, the only executive officers
of the Company whose total annual salary and bonus exceeded $100,000 during the
year ended June 30, 1998 (the "Named Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
FISCAL ------------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS(#) COMPENSATION(1)
- --------------------------- ------ ---------- --------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert G. Tomlinson, 1998 $ 218,219 $ 22,000 30,000 $ 1,022
Chairman of the Board and 1997 192,726 45,000 30,000 796
Chief Executive Officer 1996 117,308 49,419 -0- 796
Robert W. Haley, 1998 $ 170,571 $ 15,000 20,001 $ 1,022
President 1997 154,164 36,000 30,000 664
1996 112,115 98,026 18,750 664
</TABLE>
___________________
(1) Comprised of Company contributions to the Named Officer's 401(k) plan and
$138 per year per each Named Officer for term life insurance premiums.
OPTION GRANTS TABLE. The following table sets forth information on
grants of options pursuant to the Company's 1993 Stock Option Plan, as amended
and restated, during fiscal 1998 to the Named Officers. The hypothetical gains
or "option spreads" that would exist for the respective options are set forth in
accordance with the rules of the Securities and Exchange Commission. These
gains are based on the assumed rates of annual compound stock price appreciation
of 5% and 10% from the date the option was granted over the full option term and
do not represent any assurance that the shares of Common Stock will appreciate
in value. The actual value realized may be greater or less than the potential
realizable value set forth in the table.
-4-
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
---------------------------------------------------------------- ----------------------------------------
NUMBER OF SECURITIES PERCENT OF TOTAL EXERCISE OR
UNDERLYING OPTIONS/ OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION
NAME SARS GRANTED EMPLOYEES IN FISCAL YEAR ($/SHARE)(1) DATE 5% ($) 10% ($)
- --------------- -------------------- ------------------------ ------------ ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Tomlinson 30,000 21.1% $10.625 11/12/07 $200,460 $508,005
Robert W. Haley 20,001 14.0 $10.625 11/12/07 133,647 338,687
</TABLE>
_______________
(1) The exercise price is equal to the market price of the underlying security
on the date of grant. Mr. Tomlinson's options are currently exercisable
and one-third of Mr. Haley's options become exercisable each November 13,
commencing November 13, 1999, subject to earlier vesting under certain
circumstances. All such options were repriced in the 1999 fiscal year.
FISCAL YEAR-END OPTIONS/OPTION VALUES TABLE.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDER- VALUE OF UNEXERCISED IN-
LYING UNEXERCISED OPTIONS/ THE-MONEY OPTIONS/SARS
SHARES SARS AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Tomlinson -0- -0- 40,000 20,000 $75,000 -0-
Robert W. Haley -0- -0- 10,000 40,001 -0- $50,002
</TABLE>
_______________
(1) The dollar values are calculated by determining the difference between the
exercise price of the options and the closing bid price for the Common
Stock of $13.125 on June 30, 1998.
No employee of the Company receives any additional compensation for his
services as a director. Non-management directors receive no salary for their
services as such, but receive a fee of $250 per meeting attended. The Board of
Directors has also authorized payment of reasonable travel or other
out-of-pocket expenses incurred by non-management directors in attending
meetings of the Board of Directors. During fiscal 1998, no non-employee
directors were granted any options.
EMPLOYMENT AGREEMENTS. Effective January 1, 1997, the Company entered
into an employment agreement with Robert G. Tomlinson. The agreement requires
that he devote his full business time to the Company as Chief Executive Officer
and/or Chairman of the Board at an annual salary of $200,000, be provided an
automobile and such bonuses as awarded by the Board of Directors. The
employment agreement extends for a three-year term. Mr. Tomlinson has the
option to convert the employment agreement to a consulting agreement in the
event of a change in control of the Company or upon his resignation. Subject to
the right of the Company to terminate the consulting agreement for cause, Mr.
Tomlinson is entitled to serve as a consultant to the Company for the duration
of the agreement and to continue to receive compensation in the amount of 60% of
his annual salary. If Mr. Tomlinson terminates the agreement with "cause" (as
defined in the agreement), or the Company terminates the agreement for other
than "cause" (as defined in the agreement), or if there is a change in control
of the Company or if Mr. Tomlinson dies, Mr. Tomlinson or his estate, as
applicable, is entitled to receive severance compensation for three years from
the date of termination in an amount equal to his annual salary and bonus
payments during the preceding 12 months. During the time he is receiving such
severance compensation, he is entitled to participate in all employee benefit
plans, at the Company's expense. The change of control provisions and death
benefits entitle Mr. Tomlinson or his estate, as applicable, to receive such
amount in a lump sum. If Mr. Tomlinson becomes totally disabled during the term
of the agreement, his full salary will be continued for one year from
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<PAGE>
the date of disability. If termination is for any reason other than by the
Company with cause, all options previously granted shall become fully vested on
the date of termination. The agreement contains a non-competition provision for
one year following termination.
Effective January 1, 1997, the Company entered into an employment
agreement with Robert W. Haley. The agreement requires that he devote his full
business time to the Company as President or Senior Executive Officer at an
annual salary of $160,000 and such bonuses as awarded by the Board of Directors.
The employment agreement extends through December 31, 1998. If the Company
terminates the agreement for other than "cause" (as defined in the agreement),
Mr. Haley is entitled to receive severance compensation for one year from the
date of termination in an amount equal to his annual salary and bonus payment
during the preceding 12 months. If Mr. Haley terminates the agreement with or
without cause, Mr. Haley is entitled to receive severance compensation for one
year in an amount equal to 60% of his annual salary and bonus payment during the
preceding 12 months. During the time he is receiving any such severance
compensation, he is eligible to participate in all employee benefit plans, at
the Company's expense. If there is a non-negotiated change in control of the
Company or if Mr. Haley dies, Mr. Haley or his estate, as applicable, is
entitled to lump sum severance compensation equal to three times his annual
salary and bonus payment during the preceding 12 months. If Mr. Haley becomes
disabled during the term of the agreement, his full salary will be continued for
one year from the date of disability. If termination is for any reason other
than by the Company with cause, all options previously granted shall become
fully vested on the date of termination. The agreement contains a
non-competition provision for one year following termination.
STOCK OPTION PLAN
The Company adopted a stock option plan in 1993 (as amended, the "Option
Plan"). The Option Plan, as amended, provides for the granting of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and non-qualified stock options to purchase up to a maximum
number of 1,350,000 shares. Non-qualified options may be granted to employees,
directors and consultants of the Company, while incentive options may be granted
only to employees. No options may be granted under the Option Plan subsequent
to February 28, 2003.
The Option Plan is administered by the Compensation Committee of the
Board of Directors, which determines the terms and conditions of the options and
SARs granted under the Option Plan, including the exercise price, number of
shares subject to the option and the exercisability thereof.
The exercise price of all incentive options granted under the Option
Plan must be at least equal to the fair market value of the Common Stock of the
Company on the date of grant. In the case of an optionee who owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company, the exercise price of incentive options shall
be not less than 110% of the fair market value of the Common Stock on the date
of grant. The exercise price of all non-qualified stock options granted under
the Option Plan to non-employee directors must be 100% of the fair market value
of the Common Stock, and the exercise price of all non-qualified stock options
granted to consultants may not be less than 100% of the fair market value of the
Common Stock. The term of all options granted under the Option Plan may not
exceed ten years, except that the term of options granted to any optionee who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company may not exceed five years. The Option Plan may
be amended or terminated by the Board of Directors.
The Option Plan provides the Board of Directors or the Compensation
Committee the discretion to determine when options granted thereunder shall
become exercisable, subject to certain Option Plan provisions, and the vesting
period of such options. Upon termination of a participant's employment or
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<PAGE>
onsulting relationship with the Company, all unvested options terminate and are
no longer exercisable. Vested options shall remain exercisable for a specified
period of time following the termination date. The length of such extended
exercise period generally ranges from 30 days to one year, depending on the
nature and circumstances of the termination.
As of June 30, 1998, a total of 421,999 non-qualified and incentive
options were outstanding, with exercise prices ranging from $2.50 to $14.25 per
share and a weighted average exercise price per share of $10.85.
401(k) PLAN
In January 1996, the Company adopted a defined contribution savings plan
(the "401(k) Plan") to provide retirement income to employees of the Company.
The 401(k) Plan is intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended. The 401(k) Plan covers all employees who are
at least age 18 and have been employed at least three months. It is funded by
voluntary pre-tax contributions from employees up to a maximum amount equal to
15% of annual compensation and through matching contributions by the Company up
to 5% of the employee's annual compensation. Upon leaving the Company, each
participant is 100% vested with respect to the participant's contributions and
is vested based on years of service with respect to the Company's matching
contributions. Contributions are invested as directed by the participant in
investment funds available under the 401(k) Plan. Full retirement benefits are
payable to each participant in a single cash payment or an actuarial equivalent
form of annuity on the first day of the month following the participant's
retirement. The Company contributed $14,019 to the 401(k) Plan in the year ended
June 30, 1998.
COMPENSATION COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of the
previous filings made by the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that might incorporate future filings including, but not limited to, this
Proxy Statement, in whole or in part, the following Compensation Committee
Report and the performance graph appearing herein shall not be deemed to be
incorporated by reference into any such future filings.
This Compensation Committee Report discusses the Company's executive
compensation policies and the basis for the compensation paid to the Company's
executive officers, including its Chief Executive Officer, during fiscal 1998.
Compensation Policy. The Company's policy with respect to executive
compensation has been designed to:
- Adequately and fairly compensate executive officers in relation to
their responsibilities, capabilities and contributions to the
Company in a manner that is commensurate with compensation paid by
companies of comparable size or within the Company's industry;
- Reward executive officers for the achievement of short-term
operating goals and for the enhancement of the long-term value of
the Company; and
- Align the interests of the executive officers with those of the
Company's shareholders with respect to short-term operating goals
and long-term increases in the price of the Company's Common Stock.
-7-
<PAGE>
The components of compensation paid to certain executive officers
consist of (a) base salary and (b) incentive compensation in the form of
discretionary annual bonus payments and other awards made by the Company
(through the Compensation Committee) under the Company's Option Plan.
BASE SALARY. For fiscal 1998, the Compensation Committee reviewed and
approved the base salary paid by the Company to its executive officers and to
the new executive officers who were hired during the year under their respective
employment agreements. Annual adjustments to base salaries are determined based
upon a number of factors, including the Company's performance (to the extent
such performance can fairly be attributed or related to each executive officer's
performance), as well as the nature of each executive officer's
responsibilities, capabilities and contributions. In addition, for fiscal 1998,
the Compensation Committee reviewed the base salaries of its executive officers
in an attempt to ascertain whether those salaries fairly reflect job
responsibilities and prevailing market conditions and rates of pay. The
Compensation Committee believes that base salaries for the Company's executive
officers have been reasonable in relation to the Company's size and performance
in comparison with the compensation paid by similarly sized companies or
companies within the Company's industry.
INCENTIVE COMPENSATION. The Company has no formal bonus incentive plan
for executive officers. During fiscal 1998, bonuses made to executive officers
were discretionary and based on achievement of business targets and objectives,
which the Compensation Committee feels will dictate, in large part, the
Company's future operating results. The Compensation Committee believes that
its policy of compensating certain of its executive officers with
incentive-based compensation fairly and adequately compensates those individuals
in relation to their responsibilities, capabilities and contribution to the
Company, and in a manner that is commensurate with compensation paid by
companies of comparable size or within the Company's industry. The Compensation
Committee has authority to select the executive officers and employees who will
be granted bonuses and other awards and to determine the timing, pricing and
amount of any such bonuses or awards.
OTHER BENEFITS. The Company does not maintain any other plans and
arrangements for the benefit of its executive officers except to provide a life
insurance policy for the benefit of certain executive officers' named
beneficiaries. The Company believes these benefits are reasonable in relation
to the executive compensation practices of other similarly sized companies or
companies within the Company's industry.
The Compensation Committee believes that the concepts discussed above
further the shareholders' interests and that officer compensation encourages
responsible management of the Company. The Compensation Committee regularly
considers the effect of management compensation on shareholder interests. In
the past, the Board of Directors based its review in part on the experience of
its own members and on information requested from management personnel. These
same factors will be used in the future in determining officer compensation.
This report was furnished by Mark J. Stevenson, Ronald J. Norick and
James H. Everest.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Mark J. Stevenson, Ronald J.
Norick and James H. Everest, all of whom are independent directors of the
Company. None of these members have ever been an officer or employee of the
Company or its Subsidiary nor have any of them ever had a relationship which
would require disclosure under the "Certain Relationship and Related
Transactions" captions of any of the Company's filings with the Commission.
-8-
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph prepared by Media General Financial
Services comparing the yearly percentage change in the Company's cumulative
total shareholder return (share price appreciation plus dividends) on the
Company's Common Stock with the cumulative total return of (i) the Nasdaq Stock
Market and (ii) the stocks of apparel manufacturers having Standard Industrial
Classification codes from industry group numbers 231 through 235, which is
deemed as a market weighted index of publicly traded peers, for the period from
April 5, 1994 (the first date on which the Company's Common Stock began trading
on The Nasdaq Stock Market) through June 30, 1998 (the "Measurement Period").
The graph assumes that $100 is invested in each of the Common Stock, the Nasdaq
Stock Market Index and the publicly traded peers on April 5, 1994 and that all
dividends were reinvested (there were no dividends paid by the Company during
the Measurement Period). The Company's shareholder return is calculated by
dividing (i) the difference between the Company's share price at the beginning
($5.00 at April 5, 1994) and at each June 30 of the Measurement Period by (ii)
the share price at the beginning of the Measurement Period.
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30,
APRIL 5, 1994 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Sport-Haley, Inc. $100.00 $120.71 $175.15 $276.92 $317.16 $248.52
Industry Peer Group Index 100.00 93.48 94.82 131.29 154.32 182.68
Nasdaq Market Index 100.00 99.15 116.29 146.39 176.34 233.75
</TABLE>
COMMON STOCK OWNERSHIP
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of November 30,1998 by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (ii) each director or nominee, and (iii) all executive officers
and
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<PAGE>
directors as a group. The information with respect to institutional investors
is derived solely from statements filed with the Commission under Section 13(d)
or 13(g) of the Exchange Act. Each person has sole voting and sole investment
or dispositive power with respect to the shares shown except as noted.
<TABLE>
<CAPTION>
SHAREHOLDINGS ON NOVEMBER 30, 1998
-----------------------------------------------
NAME AND ADDRESS (1) NUMBER OF SHARES (2) PERCENT OF CLASS (3)
-------------------- --------------------
<S> <C> <C>
Robert G. Tomlinson(4) . . . . . . . . . . . . . . . . 78,000 1.8%
Robert W. Haley(5) . . . . . . . . . . . . . . . . . . 38,283 *
Mark J. Stevenson(6) . . . . . . . . . . . . . . . . . 8,333 *
Ronald J. Norick(7). . . . . . . . . . . . . . . . . . 69,833 1.6%
James H. Everest(6). . . . . . . . . . . . . . . . . . 33,333 *
Woodland Partners, LLC . . . . . . . . . . . . . . . . 914,900 20.8%
60 South Sixth Street, Suite 3750
Minneapolis, Minnesota 55402
U.S. Bancorp.. . . . . . . . . . . . . . . . . . . . . 369,600 8.4%
601 Second Avenue South
Minneapolis, Minnesota 55402
Delaware Management Holdings, Inc. . . . . . . . . . . 236,900 5.4%
2005 Market Street
Philadelphia, Pennsylvania 19103
All directors and officers as a group
(Ten persons)(8) . . . . . . . . . . . . . . . . . . . 276,215 6.1%
</TABLE>
___________________
* Less than 1%
(1) Except as noted above, the address for all persons listed is 4600 E. 48th
Avenue, Denver, Colorado 80216.
(2) Ownership includes both outstanding Common Stock and shares issuable upon
exercise of options that are currently exercisable or will become
exercisable within 60 days after the date hereof.
(3) All percentages are calculated based on the number of outstanding shares in
addition to shares which a person or group has the right to acquire within
60 days of December 17, 1998.
(4) Includes 40,000 shares subject to currently exercisable options.
(5) Includes 16,667 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
(6) Includes 8,333 shares subject to currently exercisable options or options
which will become exercisable within 60 days after the date hereof.
(7) Includes 16,666 shares subject to currently exercisable options.
(8) Includes 135,832 shares of Common Stock subject to currently exercisable
options or options which will become exercisable within 60 days after the
date hereof. Excludes shares of Common Stock as to which officers and
directors disclaim beneficial ownership.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE DIRECTOR NOMINEES IDENTIFIED ABOVE.
-10-
<PAGE>
II. SELECTION OF AUDITORS
The firm of Levine Hughes & Mithuen, Inc. has examined the financial
statements of the Company for the period from July 1, 1993 to June 30, 1998.
Subject to shareholder approval, Levine Hughes & Mithuen, Inc. has been
re-appointed by the Board of Directors to serve as the Company's independent
auditors for the 1998-1999 fiscal year. Representatives of Levine Hughes &
Mithuen, Inc. are expected to be present at the Annual Meeting with the
opportunity to make a statement if it is their desire to do so, and will be
available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF LEVINE
HUGHES & MITHUEN, INC. AS INDEPENDENT AUDITORS FOR THE COMPANY.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission, The Nasdaq Stock Market, Inc., the Pacific
Stock Exchange and the Company. Specific due dates for these reports have been
established and the Company is required to disclose in this annual report on
Form 10-K any failure to file, or late filing, of such reports with respect to
the period ended June 30, 1998. Based solely on the Company's review of Forms
3, 4 and 5 and amendments thereto furnished to the Company and all written
representations with respect to filing of such Forms, the Company is aware that
Mr. Blair filed his Form 3 late and that Messrs. Tomlinson and Haley and Ms.
Blair filed their respective Form 5's to report the grant of options during the
year late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has adopted a policy pursuant to which material transactions
between the Company and its executive officers, directors and principal
shareholders (i.e. shareholders owning beneficially 5% or more of the
outstanding voting securities of the Company) shall be submitted to the Board of
Directors for approval by a disinterested majority of the directors voting with
respect to the transaction. For this purpose, a transaction is deemed material
if such transaction, alone or together with a series of similar transactions
during the same fiscal year, involves an amount which exceeds $60,000.
ANNUAL REPORT
The Annual Report to Shareholders for the fiscal year ended June 30,
1998 is being sent to all shareholders with this Proxy Statement. The Annual
Report to Shareholders does not form any part of the material for the
solicitation of any Proxy. The Annual Report to Shareholders contains the
Company's Annual Report on Form 10-K for the year ended June 30, 1998 as filed
with the Securities and Exchange Commission. An additional copy, without
exhibits, is available without charge to any shareholder of the Company upon
written request to the Secretary, Sport-Haley, Inc., 4600 E. 48th Avenue,
Denver, Colorado 80216.
-11-
<PAGE>
SHAREHOLDER PROPOSALS
Shareholders who intend to submit proposals for inclusion in the Proxy
Statement relating to the year ending June 30, 1999 must do so by sending the
proposal and supporting statements, if any, to the Company no later than August
25, 1999. Such proposals should be sent to the attention of the Corporate
Secretary, Sport-Haley, Inc., 4600 East 48th Avenue, Denver, Colorado 80216.
OTHER MATTERS
Except for the matters described herein, management does not intend to
present any matter for action at the Annual Meeting and knows of no matter to be
presented at such meeting that is a proper subject for action by the
shareholders. However, if any other matters should properly come before the
Annual Meeting, it is intended that votes will be cast pursuant to the authority
granted by the enclosed Proxy in accordance with the best judgment of the person
or person acting under the Proxy.
-12-
<PAGE>
SPORT-HALEY, INC.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 16, 1999
KNOW ALL MEN BY THESE PRESENTS: that the undersigned shareholder of Sport-Haley,
Inc. (the "Company") hereby constitutes and appoints Robert G. Tomlinson, as
attorney and proxy, with the power to appoint his substitute, and hereby
authorizes him to represent and vote, as designated below, all of the shares of
Common Stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held February 16, 1999, and
at any and all adjournments thereof with respect to the matters set forth below
and described in the Notice of Annual Meeting of Shareholders and Proxy
Statement dated December 17, 1998, receipt of which is acknowledged.
1. TO CONSIDER AND ACT UPON A PROPOSAL TO ELECT MESSRS. ROBERT G.
TOMLINSON, ROBERT W. HALEY, MARK J. STEVENSON, RONALD J. NORICK AND
JAMES H. EVEREST AS DIRECTORS TO HOLD OFFICE FOR ONE-YEAR TERMS OR
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
/ / FOR ELECTION OF ALL NOMINEES (Except as shown below)
/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
Instructions: To withhold authority to vote for any
individual nominee, strike through the nominee's name below:
ROBERT G. TOMLINSON
ROBERT W. HALEY
MARK J. STEVENSON
RONALD J. NORICK
JAMES H. EVEREST
2. TO RATIFY THE APPOINTMENT OF LEVINE HUGHES & MITHUEN, INC. AS AUDITORS
OF THE COMPANY.
/ / FOR RATIFICATION
/ / AGAINST RATIFICATION
/ / ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY AND ALL
ADJOURNMENTS THEREOF.
/ / AUTHORIZED TO VOTE
/ / ABSTAIN
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). IF NO INDICATION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED AND FOR PROPOSAL 2 AND THE PROXY HOLDER WILL VOTE
ON ANY PROPOSAL UNDER 3 IN HIS DISCRETION AND IN HIS BEST JUDGMENT.
Please mark, date, and sign exactly as your name appears on your stock
certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person. If this Proxy is not dated, the Proxy
will be deemed to bear the date the form was mailed to the shareholder.
Dated:
--------------- -----------------------------------
Signature
Dated:
--------------- -----------------------------------
Signature if held jointly
